Frequently Asked Questions
To help our customers prepare their US expat taxes while living abroad, we’ve prepared a list of the most frequently asked US expat tax questions.
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Top Ten Expat Questions
- As an American expat, do I need to file a US Federal Tax Return?
- As an American expat, do I need to file a US state tax return?
- Can you help me renounce my US citizenship?
- I will be outside the US for 330 days, but not in one calendar year. Can I still use the Foreign Earned Income Exclusion to reduce my tax bill?
- How will the new tax bill affect me as an expat?
- I have not filed my US tax return in years; where do I start?
- How do I know if I need to complete the Foreign Bank Account Reporting (FBAR)?
- How much do I need to have overseas to worry about filing under FATCA?
- Am I entitled to Social Security as an US expat?
- Are capital gains included in worldwide income?
As an American expat, do I need to file a US Federal Tax Return?
Overall, US citizens and Green Card holders are required to file a US Federal Tax Return each year if their income is over the minimum threshold. No matter where you have earned this income, what currency it is earned in, or whether you have also paid taxes in the country in which you reside, you are required to file in the US if your income is above these levels.
The thresholds are currently:
- Single with income over $10,300
- Married filing jointly with income over $20,600
- Married filing separately with income over $4,000
- Self-employed individuals need to file if their income is over $400
Note: You may need to file state taxes as well as taxes for your small business operating overseas. Depending on your situation, you may also be required to file additional reports including Form 8938 and the Foreign Bank Account Report (FBAR or FinCEN Form 114) to report assets held overseas.[back to top]
As an American expat, do I need to file a US state tax return?
When it comes to US state tax returns, every state is different. Some states are more favorable for expats, since they have no income taxes. These states include Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. New Hampshire and Tennessee are also favorable states because they only collect taxes on dividend and interest income. Unfavorable states include California, South Carolina, and New Mexico; these states see their taxpayers as assets and will leave the burden of proof on you to prove you are no longer a resident.
You may be required to file a state return if you are tied to the state in the following ways:
- Mortgage or lease payments on property
- State driver’s license
- State bank accounts or investments
- Telephone and utility bills
- Voter registration
- Library cards
- Mail correspondence
- Association memberships
- Dependents living within the state
As an American expat, if you have some of the above ties in one of the states that have income taxes, you may be required to submit a state return until you prove residency in another state.[back to top]
Can you help me renounce my US citizenship?
The decision to renounce your US citizenship is a big one, and if you have decided that it is the right choice for you, we can certainly help!
The renunciation process requires you to be caught up on your US tax obligation, which may mean filing up to 8 tax returns at one time as well as the Foreign Bank Account Reports. We can prepare all of these documents for you and help you file them with the IRS. The actual steps to renounce your citizenship and the number of returns required can vary based on the rules in your local US embassy, so we recommend speaking with someone there first, and then contacting us to do the tax return preparation for you.[back to top]
I will be outside the US for 330 days, but not in one calendar year. Can I still use the Foreign Earned Income Exclusion to reduce my tax bill?
Yes, the Physical Presence Test requires that you be inside a foreign country for 330 days in any 365-day period. This can run from January to December or from June to May. If the time is split across 2 tax years, you will get a pro rata exclusion for each year. If you have not yet been abroad for 330 days but you will be, you can file for an extension using Form 2350, which will allow you to wait until you meet the 330-day requirement.[back to top]
How will the new tax bill affect me as an expat?
Greenback experts have compiled a list of changes in taxation that expats will encounter under the new law. Some of the deductions and exclusions remain the same, while others have undergone significant changes. Click here to get all the information you need for the upcoming changes to expat taxes![back to top]
I have not filed my US tax return in years; where do I start?
This situation is more common than you might think. You should start by talking with an expat tax expert to identify how many years of back taxes you are going to need to file and what documentation you need in order to complete the necessary reports and returns to become compliant with the US tax authorities. You will need to prove expat status for each year. Be aware that you may owe penalties for filing late or failing to pay taxes on time. Generally speaking, this will only be the case if you owed money on your US taxes, which will cause interest and penalties to accrue on the underpayment. If you have not declared your foreign bank accounts, you may also need to file FBAR forms for the years you have missed. Our experience is that people who come forward have been given more leniency than people the IRS has found through their own means.[back to top]
How do I know if I need to complete the Foreign Bank Account Reporting (FBAR)?
Basically, anyone with $10,000 or more (USD equivalents included) in a foreign bank or financial account at any point during the calendar year will be required to file the FBAR. So, if your bank account in France typically has a balance of $9,950, but for one day has an extra $50, you will need to file an FBAR. Cumulative balances are also counted, so if you have $3,000 in four separate accounts, you will be required to file the FBAR. For more information, please refer to our blog post: Everything You Need to Know About the FBAR.[back to top]
How much do I need to have overseas to worry about filing under FATCA?
Having foreign accounts over a certain threshold often necessitates additional form filing. Under FATCA regulations, if an individual has more than $50K in a foreign account, they must file Form 8938. Fortunately though, these thresholds are much higher for Americans living abroad – roughly $200K is needed to file. As such, if you do not have more than $200K in foreign accounts, FATCA is unlikely to impact you.
One other form you should know about is the FBAR. The FBAR is needed if you have more than $10K in foreign accounts. If this is the case, you would need to file the last 6 years to be considered caught up. We can file the FBAR for as little as $95 per year, and this covers reporting up to five accounts.[back to top]
Are capital gains included in worldwide income?
Capital gains are included in your worldwide income for US tax purposes. Gift, real estate, and inheritance taxes all apply to US citizens and Green Card holders regardless of where they were located. You will also be taxed on any income from dividends or investments overseas and may face increased reporting requirements on foreign mutual funds or investment vehicles. There may also be different tax rules and exceptions for each type of investment, so we suggest you seek expat tax advice regarding any capital gains you expect to receive in a given tax year.[back to top]