With only a little over two weeks until the first US tax deadline, known as Tax Day to most Americans, you probably have a few questions about the tax for expats filing process for US expats. In addition to a built-in extension, Americans living and working abroad have some additional guidelines and reporting to be aware of, so here’s what you need to know.
1. What Deadlines Should I Mark on My Calendar?
This one is so important – because if you’re living abroad, you have some additional dates to keep track of. While traditionally, Tax Day (usually on April 15th, but falls on April 18th this year) is the filing deadline for a US Tax Return, US expats living overseas on this date receive an automatic two-month extension for filing their tax for expats. With that said, you should be aware of the following dates:
- April 18th – Tax Day for most Americans, but those living overseas receive an automatic two-month extension. Note: this is an extension of time to file, but not an extension of time to pay. If you owe taxes, they are due April 18th, or interest will accrue until paid.
- June 15th – This is the expat tax deadline. You will be required to submit your Form 1040 and any additional forms required of your situation by this date (including FATCA Form 8938, if you meet the qualifications). You can also request an extension until October 16th, but your request must be submitted by this deadline.
- October 16th – This is the final expat tax deadline, if you requested an extension by June 15th.
- FBAR Deadline for 2017 – Big changes for FBAR filing this year! It will follow the tax deadlines, with the first deadline being April 18th, though expats receive an extension until June 15th. Also, there is an additional automatic extension until October 16th this year to help taxpayers acclimate to the new deadlines.
2. What Documents Should I Have Handy When Filing My Tax for Expats?
It’s very helpful to have your US expat tax returns from prior years as well as those from your host country. You’ll also need income statements showing your salary, capital gains, interest, rents, royalties, etc., expenses and deductions (dependents, housing costs, capital losses, moving expenses, etc.), and travel records for determining if you qualify for the Physical Presence Test or Bona Fide Residence Test for the Foreign Earned Income Exclusion.
3. What Forms and Schedules Will I Need to File with my Expat Taxes?
All expats will need to complete Form 1040, just like Americans living inside the US are required to do. A majority of expats will also want to complete Form 2555 for the Foreign Earned Income Exclusion (FEIE) and/or Form 1116 for the Foreign Tax Credit to avoid double taxation on your tax for expats.
You may also need to file schedules specific to your personal situation. The most common ones are as follows:
- Schedule A for itemized deductions
- Schedule B for interest and dividend income
- Schedule C for income and expenses from self-employment
- Schedule D for capital gains or losses
- Schedule E if you own a rental property
And don’t forget, you may need to report your foreign financial accounts via the Foreign Bank Account Report (FBAR) if your cumulative balances exceed $10,000 at any point during the tax year. As noted above, the FBAR deadline now follows the American expat tax deadline, which makes it easier to keep track of!
4. What Foreign Exchange Rate Should Be Used?
The IRS requires that all income or expenses be reported in US dollars, and there are two ways in which you can dollarize on your tax for expats:
- You can itemize all income and expenses and use the exchange rate on the day the payment was made or received.
- You can total all of your income or expenses and use the average annual exchange rate – but only if your income and expenses are earned or paid evenly over the year.
In any event, you’ll want to look at both exchange rates and ensure you choose the one that will convert your income into the lowest dollar amount (see current exchange rates on the IRS website here). You can learn more about how to save on your tax for expats by downloading our tax guide for Americans working overseas.
Are You Ready to Begin Your Expat Taxes?
Our team of expat-expert CPAs and IRS Enrolled Agents have the expertise you’re looking for in a tax professional, and we’ll help make filing expat taxes a hassle-free experience. Get started with us today and cross expat taxes off your to-do list!