It’s almost November, and with the upcoming holiday season, the New Year will be here before you know it. Now is a great time to begin planning for the impending tax season, so you can plan ahead to maximize your refund and prevent having to do a last-minute scramble for all of the tax information and documents you’ll need to prepare your expat taxes. Here are a few tips to help you get prepared before the end of the year.
Where to Begin
While you may not have everything you need yet since the tax year isn’t over, there are a number of things you can do to prepare before the tax deadlines approach. There is quite a bit of information needed, especially since you’re living abroad and filing expat taxes, so it’s a good idea to begin gathering documents now in order to reduce the time and potential stress of doing it all at once.
Documents You’ll Need
Nearly all US taxpayers use the calendar year for expat taxes, so you will want to gather documents and information from January through December 2016. Gathering as much of the following information as possible ahead of time can be a huge help!
Income Documents: As an expat, you will find that your resident country’s income reporting forms differ from those in the US, so you’ll need to prove your income in a different way to the IRS and your tax preparer. You can use your monthly/bi-weekly pay statement for this purpose, as it will show your gross income and any taxes paid to your resident country. If you don’t receive any type of pay statement, you should add the amounts received for the calendar year thus far.
If you have interest, dividends or capital gains received, they will need to be included as part of your income documentation. If your investments are from a US brokerage/investment house, you won’t need to keep track of these investments yet, as you’ll receive a statement in March of the coming year.
Self-employed? You’ll need to add your income and expenses up to this point in the year – it will help make the final figures easier to calculate come December 31st.
Bank Account Information: Owning a non-US bank account means you’ll find you have additional reporting requirements along with your US tax return. As we’re nearing the end of the year, now is a good time to evaluate your bank statements to see if you’ve surpassed the $10,000 USD threshold that requires you to file a Foreign Bank Account Report (FBAR) form. If you have surpassed this, you will need to take note of the maximum balances of your bank account(s), the bank name, account number and any joint owners of the account(s). Gathering this information now will make it easy for you to just peek at the last few months of account information once the New Year rolls around.
Travel Dates To and From the US: It’s actually a good idea to keep track of these dates throughout the year on a calendar or in a journal. This will prevent losing track of the exact travel dates for the year, since the IRS requires actual dates, not estimates. If you traveled for business, note the actual dates, business conducted and amount of income earned while in the US. If you traveled for pleasure or personal business, you’ll need to know the dates you entered and exited the US.
Housing Expenses: You may be able to take a deduction on your foreign housing expenses in addition to the Foreign Earned Income Exclusion at tax time. Calculate your housing expenses up until this point, which means you’ll only have a few additional months to add in once this year ends. The expenses you’ll want to add up include rent (not mortgage payments), utilities (except for TV or internet), homeowners’ or renters’ insurance premiums, furniture rental and property taxes (or the equivalent).
Estimated Tax Payments: If you owed money when filing expat taxes last year, you may find that you owe again when you file in the coming year. If your situation has remained largely the same as the previous year or if you’ve made significantly more income, it’s a good idea to prepay your taxes to the IRS. This will help you avoid penalties or interest on a balance due to the IRS. If you’re unsure about determining taxes owed, it’s a good idea to consult with an expat tax professional for guidance.
These are all basic items you can count on needing when it comes time to file your expat taxes, so taking the time to slowly prepare will save you time and prevent you from rushing or stressing to gather all of the pieces you need. For information specific to your tax situation, download a US expat tax guide to get the details you need to be prepared come tax time!
Need Help Determining What Tax Information to Gather?
Our team of expat-expert CPAs and IRS Enrolled Agents can assist with all of your expat tax needs to make filing your tax return a more hassle-free process. Contact us today!
