Streamlining Expat Tax Preparation: Essential Documents

Expatriate tax preparation can feel like a difficult process. It doesn’t have to be that way! Understanding which docs to provide will make the process go smoother on both sides.

Basic Information to Help Simplify Your Expatriate Tax Preparation

Tax Questionnaire

Once you engage an accounting practice for your overseas tax return preparation, you will likely receive a “tax questionnaire.” This form will ask you to provide basic information. This information includes your name, address, ID numbers, and dependent info. It will also ask you a series of questions about other activities in which you may have engaged that could affect your taxes. Remember, filling out this form properly usually saves plenty of time in the long run!

Prior Year’s Overseas Tax Return

Providing your previous year’s tax return will assist with your current year’s return in many ways. First, it will supply a reference point. The preparer will also use it to compare against your current year return to look for any changes. You may have overlooked income or deductions in prior years. Your expatriate tax preparation specialist will tell you if you missed anything. Information from your prior year’s return is also necessary to electronically file after your current year’s return is complete.

Travel Calendar

Do you travel back and forth between the US and a foreign country? Your income and deductions must be split for the time spent in and out of the US. This is for the Foreign Earned Income Exclusion and the housing deduction. Providing an accurate and detailed travel calendar is essential for overseas tax return preparation.

Income

Wages, Compensation, or Tips

Wages from an employer are typically reported to you on a W-2, P60, P45, or your host country’s equivalent. If you are self-employed, please provide records of your earnings and deductions for the calendar year. These are some of the most important documents required for your overseas tax return. You may live in a country that does not have any income taxes, in which case you will be required to self-report your income. You may need to explain it to the IRS with bank statements or something similar.

Interest and Dividend Income

Interest and dividend income are typically provided to you by your bank or brokerage house. This will come on Form 1099 or the foreign equivalent, and it is vital that you give this to your tax accountant, even if the account is now closed. You should have one of these statements for each interest-bearing account.

Stocks and Other Securities

Your investment broker will provide you with a statement. This statement should detail all stocks and securities that were sold or purchased in the year. This information is necessary for your expatriate tax preparation. Please ensure that the statement supplies the original “basis” of securities sold as well as the sale or purchase dates. This is required to accurately calculate the gain or loss on the sale of the securities.

Real Estate Transactions

If you bought or sold real estate in the current year, tax implications are inevitable. The purchase price, date of the transaction, and the purpose of the property are potentially necessary for your overseas tax return. If you own rental property, you will need to provide a financial statement detailing the income and applicable expenses, as well as when acquired and how many terms it was rented for during the relevant tax year. Check out The Complete Guide to Real Estate Investment for even more information.

Pensions, Annuities, Profit Sharing, IRA, or Other Accounts

Withdrawals from your pension, IRA, or equivalent retirement account(s) must be reported. The financial institution or your employer will usually send you a 1099-R. They may also send the foreign equivalent. They will report withdrawals at the end of each year. You must include this on your overseas tax return.

Social Security Benefits

Social security benefits will be reported to you via Form 1099-SSA which should be given to whoever is preparing your overseas tax return. Your preparer should also double-check the social security agreements. If your host country has an agreement, this can impact your taxes, which is especially important if you are self-employed.

Other Income

If you have business, trust, or partnership interests, you need to report them. You will receive a Schedule K-1 or equivalent. Be sure to send any miscellaneous income that may have been reported to you on Form 1099-MISC. Other sources of income reported on your expat tax return include unemployment reported via 1099-G or any alimony or child support received.

Deductions

Interest & Taxes Paid

Interest that you paid on a mortgage for your home or against an outstanding student loan is deductible on your expat tax return. Other deductible taxes include foreign income taxes, real and personal property taxes, and local excise taxes. Please provide documents for any deductible taxes and interest paid by you.

Foreign Housing Expenses

Qualified individuals may elect to deduct a certain amount for foreign housing expenses. Your preparer can determine whether or not you qualify. You will be asked to provide details of your foreign housing expenses, including rent, utilities, property insurance, repairs, and parking.

Dependents

Your children and other dependents can be a source of deductions or credits. Please make sure to provide all dependent information. You also need to explain expenses incurred for childcare for children under 13. If you have children enrolled in higher education and pay for their education, you may also receive a deduction or credit. This can help cover the tuition expenses, so be sure to provide necessary info on these expenses.

Other Deductions

Other potentially deductible expenses that should be provided include medical expenses not covered by insurance, charitable donations, alimony and child support paid, gifts to relatives or others, and unreimbursed business expenses.

Foreign Bank Accounts

If you have foreign bank accounts, they may need to be reported. If you have over $10,000 aggregate balance overseas in any year, you must report these account(s) to the Treasury by April 15^th of each year. This is not part of your tax return; it is reported separately. Most preparers will either file on your behalf or advise you how to file using FBAR Form FinCen 114.

One Last Piece of Expatriate Tax Preparation Advice

If you feel as if you are still missing a tax document, don’t ignore it! Contact the issuer to have it re-sent. It may have gotten lost in the mail if you did not receive it, but it still may have been reported to the IRS. If it was reported to the IRS but omitted on your  tax return, the IRS might catch that omission, which could prompt an audit of your  tax return.

Would You Like Specialized Help With Your Expatriate Tax Preparation?

If you have further questions about overseas tax returns or would like to learn more about our expatriate tax preparation services, get started with Greenback today.