How Your Taxes Are Affected When You’re No Longer a US Expat

Tax Effects When You're No Longer a US Expat

When coming back to the US after a stint abroad – no matter how long or short – you’ll have plenty of things to think about. Chances are, US expat taxes aren’t the first thing on your mind – but definitely something that you need to consider, since a change in location can have a big impact on your US Tax Return. Get the details here.

How Do I Know I’m Not a US Expat?

When it comes to taxes, when you arrive back to the US to live will determine your status. Non-expat filing is triggered when a US citizen or green card holder is living in the US on Tax Day. For the 2016 tax year, if you were living in the US on April 18th, you’re no longer considered a US expat for tax purposes. This is true, even if you move back to the US the day before the tax deadline.

What Do I Need to Do If I Move Back?

The most important thing to do when you move back to the US is be sure you let your accountant know as early as you can prior to the April deadline, since you’ll need to file by that date. When it comes to documents and information, there are several things you need to gather.

  • Moving Cost Information – If your employer reimbursed your moving costs on an “accountable plan,” your reimbursement will be taxable unless you file Form 3903 for deductible moving costs – so it’s important to be sure this form is completed with your expatriate tax return.
  • Sold Property – If you owned foreign property and sold it before your return to the US, you’ll need to provide the following information:
    • Cost to purchase home
    • Date you purchased home
    • Date you sold home
    • Amount you sold home for
    • Any expenses you paid for commissions, etc. when purchasing and selling the home
    • Has it been less than 2 years since you purchased the home overseas? If so, you need to share info about why you moved back to the US (such as a job loss, job change, personal reasons, etc.). All of these reasons can be used to get part of the home sale exclusion if you do not meet the time test.
    • Read more about capital gains from real estate in this article.

What Happens If I Don’t File By the April Deadline?

If you’re no longer a US expat, a big risk is failing to meet the April deadline – depending on when you return to the US. If it’s a day before the deadline that you return, you may not have realized you need file by that date. That’s why it’s so important to stay on top of your US tax obligations! However, if you do miss the deadline, the biggest penalty you might face would be a failure to pay taxes timely, if you owed taxes. Note that interest accrues for all taxpayers, expats or not, when not paid by the April deadline, so this aspect wouldn’t change no matter where you live. Fortunately, most penalties can be removed for reasonable cause if you’ve always filed tax returns in a timely manner.

What Deductions and Credits Would I Still Be Able to Use?

You’ll actually still be able to use some of the savings available to US expats, even if you returned to the US.

  • Foreign Earned Income Exclusion – You can continue to use this exclusion, though it will be limited to the time period that you were living outside the US on income earned outside the US.
  • Foreign Tax Credit (FTC) – You’re always able to use foreign tax credits against foreign income, no matter where you live. However, if the income was earned while you were in the US, you can’t use the FTC, as the tax treaty wouldn’t apply.

You can learn more about saving money on your expat taxes by downloading a US expat tax guide.

What If I Still Have Foreign Bank Accounts?

All US taxpayers are subject to the same reporting requirement of foreign financial accounts, but there is a small difference when it comes to FATCA reporting for those living within US borders that can impact your need to file.

  • FATCA Form 8938 – Your filing threshold drops from $300,000 ($600,000 for married filing jointly) in aggregate balances to $75,000 ($150,000 for married filing jointly) in aggregate balances once you return to the US.
  • FBAR – Requirements for filing FBAR will remain the same, no matter where you live in the world. If you have more than $10,000 total in foreign bank account balances during the tax year, you will need to file FBAR.

You can learn more about foreign financial account reporting here.

What About My Foreign Spouse and Children?

If you return to the US and bring your foreign spouse and children, there are several things that you will need to take action on:

  • Foreign-born spouses must apply for a Social Security Number (SSN) or ITIN, depending on the type of visa they used to enter the US.
  • The same is true for foreign-born children who were not citizens by birth.
  • If the taxpayer has foreign born children that are citizens by birth for whom they have never gotten SSNs, you’ll need to request those as soon as possible.

Need to File Your US Taxes Now That You’ve Returned to the US?

Our team of expert CPAs and IRS Enrolled Agents can help you understand your filing obligations if you’ve returned to the US and are no longer considered a US expat. Get started with us today to ensure you stay compliant on your US tax obligations, no matter where you live in the world!