Frequently Asked Questions
Working with Greenback: Common Client Questions
Are you an American living abroad struggling to navigate the tax process? Greenback specializes in tax for expats. Get all the information you need now!
- What is a W-9 and a W-8 and is there a difference between the two?
- My only significant income is a scholarship from a research foundation, which is not taxable under my country’s tax laws. How much (if any) of this scholarship needs to be declared on my US tax return?
- I made a mistake on my taxes several years ago and just now realized that I could have excluded that tax paid. Can I amend the return and get a refund?
- 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?
- What income is reportable on my US tax return?
- What are the tax deadlines in the USA?
- What is the threshold for filing if I am self-employed?
- What are the filing requirements for a non-resident living within the US (resident alien)?
- Can you still file for me even if I don’t have records or paperwork for my income?
- Can you complete my host country returns?
What is a W-9 and a W-8 and is there a difference between the two?
The W-9 is used for anyone with a tax ID number (SSN or ITIN) and basically says, “Hey IRS/Treasury, this is my Tax ID number!” Many banks are now requesting this document because of FATCA reporting requirements. Since they are required to report the assets of their American customers to the US, the W-9 or W-8 (in rare cases) is best suited for that.
Even though the W-9 is just a reporting document (you are not taxed on anything), if you are not caught up on your US filing regulations (i.e., tax returns and FBARs), it could cause trouble. It is much better to come forward to the IRS and voluntarily become compliant then to have your bank provide that information to the IRS. It could appear like you are hiding something and ‘raise a red flag.’
Lastly, the W-8 series is used to certify that the filer is not an American citizen or resident. Even though there are many of these, usually US citizens or residents won’t encounter them at all (they’re more used by non-residents with US-sourced income).[back to top]
My only significant income is a scholarship from a research foundation, which is not taxable under my country’s tax laws. How much (if any) of this scholarship needs to be declared on my US tax return?
In most cases, the scholarship will be taxable in the US. Unfortunately, there is a clause in most tax treaties that makes the tax-free status inapplicable when you’re a US citizen or permanent resident.[back to top]
I made a mistake on my taxes several years ago and just now realized that I could have excluded that tax paid. Can I amend the return and get a refund?
The IRS has a statute of limitations in place that limits the length of time where one can claim a refund. For those who filed a 1040, you have 3 years after the due date of the return, or 3 years after the date the return was actually filed, whichever is later.
If you would like to read more about the specifics of the IRS rules on this, visit http://www.irs.gov/irm/part25/irm_25-006-001r.html.[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]
What income is reportable on my US tax return?
The IRS taxes its citizens and resident aliens on their worldwide income. If you have savings and investments outside the USA, these would be taxable by the IRS; however, if you have paid tax on these savings and investments locally, you may receive a tax credit on your US taxes for the amounts paid to the foreign government.[back to top]
What are the tax deadlines in the USA?
The US tax year is the same as the calendar year, and resident aliens need to file their taxes by April 15th of the year following the tax year (this year, it will be April 18th, 2017, for the 2016 calendar year). This is the same for all US citizens living in the USA. In addition, if you have more than $10,000 in all of your foreign bank accounts, then you will also need to file a Foreign Bank Account Report (FBAR). Note that the FBAR deadline is the same as the Federal filing deadline (April 15th) for the 2016 filing year and beyond – and you may file an extension for up to six months.
Please Note: If you owe tax to the US, your interest will start accruing from the first tax deadline – April 18th. Additionally, if you did not request an extension to October 15th, a late payment penalty of 5% may be assessed each month until the tax is paid.[back to top]
What is the threshold for filing if I am self-employed?
If you have self-employment income of over $400, you will need to file a US tax return.[back to top]
What are the filing requirements for a non-resident living within the US (resident alien)?
If you are a resident alien, you generally will have the same filing requirements as a US citizen within the US. As such, you must report all income (including interest, wages, rental income, dividends, royalties, etc.) on your US return (Form 1040). You must report this income even if it originates from a country outside the US. Fortunately, you are also eligible for the same deductions a citizen would receive (these vary depending on your situation).
If you are also being taxed in your home country, you may be eligible for a foreign tax credit to use on your US return (this will help eliminate dual taxation). More information on the Foreign Tax Credit can be found on our blog. Also, we have many country-specific guides, so make sure to check and see if your home country is featured!
If you are living in the US, you will have the same filing deadline as other residents and citizens, April 18, 2016. However, if your main place of residence is still outside the US, you will have an automatic extension until June 15th for your tax documents.[back to top]
Can you still file for me even if I don’t have records or paperwork for my income?
In short, the answer is yes. We have found that in many foreign countries (especially in the Middle East where they have no income tax), the documentation that comes along with your income (if you receive any documentation at all!) can be very different from what you would receive in the US. Fortunately, our experience in dealing with these types of situations allows us to still file your US return.
In situations like these, we will ask that you provide your total income and the total taxes paid. We will also need information on any other income and/or expenses paid out (this would include bank interest and dividends, school payments, childcare expenses, housing costs, etc.). Lastly, any proof of employment would help. A statement from your employer which states you are employed will help, should the IRS question your non-W2 income. It is also a good idea to have copies of your bank statements showing the deposits you receive from your employer.
Generally, once you start working with a preparer, any other information that is needed will be asked for. As each situation is different, these documents may vary depending on the circumstances![back to top]
Can you complete my host country returns?
Many of our clients come to us asking if we can complete their host country returns (for example, their German, French, or Australian taxes). Although we would love to offer this service, with clients in more than 90 countries, it Is just not possible. We do however have a UK accountant on staff, and can complete the UK returns for our clients residing abroad.[back to top]