Recently, we held an Ask the Experts Q&A webinar with our co-founder, David McKeegan, where we discussed some of the hot topics affecting Americans working overseas related to expat taxes. Things such as the Foreign Earned Income Exclusion, FBAR, FATCA and even questions about retirement and Social Security while abroad were answered live during the webinar. Here are just a few you’ll want to take note of when it comes to your expatriate tax return.
If I don’t qualify for the Foreign Earned Income Exclusion, how can I reduce my US tax liability?
Fortunately, even if you can’t use the Foreign Earned Income Exclusion (FEIE) on your expat taxes, there are other ways you can save money when it comes to your US Tax Return! A common alternative is the Foreign Tax Credit (FTC), which is a dollar-for-dollar credit on taxes paid to your host country.
In order to take advantage of the FTC, you’ll need to meet the following criteria:
- The tax must be assessed on income.
- You must have a tax liability paid or incurred.
- The tax must be imposed on you as an individual.
- The tax must have originated legally in a foreign country.
While the FTC can be taken by US expats who meet the criteria listed above, it’s especially useful for individuals living in high-tax countries in places like Western Europe.
Do I need to file a separate FBAR if I have a joint account with my US spouse?
As you may be aware, all US citizens must file an FBAR if they greater than $10,000 in foreign bank accounts at any point during the tax year (see the full list of accounts that must be reported here). However, in some instances, spouses can file a joint FBAR – specifically, if the following conditions are met:
- All of the financial accounts that the non-filing spouse is required to report are jointly owned with the filing spouse.
- The filing spouse reports the jointly owned accounts on a timely-filed FBAR.
- Both spouses/filers have completed and signed Form 114a, “Record of Authorization to Electronically File FBARs”
If you meet all conditions listed above, you’ll be able to file jointly with your spouse. Also, note that the FBAR deadline now follows the US tax filing timeline – which means it will be due on the same day as your expat taxes – June 15th. There is also an automatic extension for 2017, making the final FBAR deadline October 16th.
Help! I didn’t realize I needed to file and I need to become compliant with the IRS. But how?
As an American living abroad, sometimes you may not have realized you have US tax filing obligations or what it entails while overseas – this is a common concern of expats. Fortunately, the IRS offers two amnesty programs to help expats get caught up on expat taxes and become compliant.
- Streamlined Filing Procedures: You must file 3 years of back tax returns and 6 years of FBARs, and won’t face late filing fees or penalties. The caveat here is you must certify that your lack of filing was non-willful – meaning you did not know you had a filing requirement.
- Offshore Voluntary Disclosure Program (OVDP): The OVDP is the alternative to the Streamlined program, and is there for expats whose lack of filing was willful. While you’ll still face penalties, it can help protect you from criminal prosecution. You should work with an attorney if getting caught up with the OVDP. Read more about the OVDP in this article.
Looking for more expert answers for your FBAR, FATCA and expat tax questions? Watch our On-Demand Ask the Experts Q&A webinar today to get the facts you need to know.
Ready to Get Started on Your Expat Taxes?
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