Frequently Asked Questions
The US Expat Tax Filing Process
Are you an American living abroad struggling to understand the US expat tax filing process? Get all the answers to your questions now.
- What are the tax deadlines for US non-residents?
- I am a non-resident alien. Will I be taxed differently than a resident alien?
- Will the IRS let me know when they have received or processed my documents?
- What deadlines do US expats need to know?
- How do I file for an extension on a US expat tax return?
- Is e-filing available for a US expat tax return?
- What forms and schedules do I need to file with my US tax return?
- What documents do I need to have ready to file my US expat tax return?
- What other information do I need to have on hand while preparing US expat tax returns?
- What foreign exchange rate should I use?
What are the tax deadlines for US non-residents?
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).
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 (please note that all taxes owed will still be due by April 18th) for your tax return filing.[back to top]
I am a non-resident alien. Will I be taxed differently than a resident alien?
Yes, as a non-resident alien, you are generally only required to report income from US sources, not your worldwide income. This income would be categorized into passive income (such as rents, dividends, capital gains, etc.) and earned income (such as income from employment or other businesses activities). Passive income generated in the USA will generally be taxed at a flat rate of 30%, although tax treaties may offer reductions or elimination of the US tax. Additionally, interest earned in depository accounts may be excluded. US earned income will be taxed after taking into account your various adjustments and deductions in the same way US residents are taxed.[back to top]
Will the IRS let me know when they have received or processed my documents?
Unfortunately, you will not receive any notice from the IRS (not even to let you know that they received your documents). If you are due a refund from the IRS, you can check on the status of the refund by clicking here.
We have found that the phrase “no news is good news” best applies to sending in your IRS documents. As such, please do not worry if you have not received notice from the IRS.[back to top]
What deadlines do US expats need to know?
Expatriates must be aware of the following deadlines for their US expat tax return.
US filing deadline and the date that tax payments are due, even for expats
US expats receive an automatic extension until June 15th to file their US taxes; note that taxes are due on April 15th, and interest (but no penalties) will be applied if taxes are not paid by April 15th. Penalties will apply if taxes are not paid by June 15th.
Foreign bank account reporting (FBAR) must be received by the US Department of the Treasury and it now must be e-filed (Note: for 2016 filing and beyond, the FBAR deadline will be the same as Federal tax returns (April 15th) – but you may be able to get an extension for up to six months)
Final deadline for expat tax returns for those who have filed for an extension
Please Note: The US Federal tax return extension is an extension of time to file and not an extension of time to pay any tax due to the IRS. If you owe tax to the US, your interest will start accruing from the first tax deadline – April 18th. Additionally, if you do not request an extension and do not file, a late payment penalty of 5% may be assessed each month until the tax is paid.
Learn more about deadlines and extensions in our blog.[back to top]
How do I file for an extension on a US expat tax return?
The IRS gives taxpayers living abroad an automatic extension beyond the US tax deadline (April 18th in 2015) to file their US expat tax returns. The automatic extension is until June 15th. If you need additional time to file your tax return, you can request an extension by filing Form 4868 and submitting it to the IRS. This will provide you with an extension until October 15th.
If you still need more time, you must write the IRS directly and request an extension until December 15th. Additionally, if you need an extension to meet the criteria of the Physical Presence Test or the Bona Fide Residence Test, you can file Form 2350 to request the additional time you need.
Please Note: The US Federal tax return extension is an extension of time to file and not an extension of time to pay any tax due to the IRS. If you owe tax to the US, your interest will start accruing from the first tax deadline – April 18th. Additionally, if you do not request an extension and do not file, a late payment penalty of 5% may be assessed each month until the tax is paid.[back to top]
Is e-filing available for a US expat tax return?
Both the IRS and the US Department of the Treasury allow for e-filing of timely filed tax returns and Foreign Bank Account Reports (FBAR), respectively. The IRS allows e-filing for federal expat tax returns, including all schedules and forms. The US Department of the Treasury’s Financial Crimes Enforcement Network recently mandated e-filing for the FBAR.
Note: E-filing is also available if you are filing 2014 and 2015 late tax returns, as long as you aren’t filing under the Streamlined Procedure. If filing Streamlined, you will need to mail paper copies of the returns to the IRS.[back to top]
What forms and schedules do I need to file with my US tax return?
No matter the situation, US expats will need to complete Form 1040 (the exact same form you would need to file if you were living in the US). In addition, US expats will also want to complete Form 2555 (Foreign Earned Income Exclusion) and/or Form 1116 (Foreign Tax Credit) to take advantage of the tools in place to avoid double taxation.
The schedules you will need to file depend on your personal circumstances, but the most common ones are:
-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
If a US expat is associated with any foreign financial accounts where the cumulative balances exceeded $10,000 at any time during the tax year, a Foreign Bank Account Report (FBAR) must be filed with the US Department of the Treasury. This form must be received by June 30th, or the taxpayer could risk the seizure of assets or a $10,000 fine. Note: the FBAR filing deadline will be changing to the Federal filing deadline of April 15th for 2016 filing and beyond – and you will be able to request up to a six-month extension.[back to top]
What documents do I need to have ready to file my US expat tax return?
Generally speaking, the most useful documents to have available are US tax returns from previous years and expat tax returns for your host country. In addition, you will need statements of income such as salaries, capital gains, interest, rents, royalties, etc., expenses and deductions such as dependents, housing costs, capital losses, moving expenses, etc. You will also need your travel records to determine if you qualify for the Physical Presence Test or your residency status to prove you qualify for the Bona Fide Residence Test.[back to top]
What other information do I need to have on hand while preparing US expat tax returns?
Unlike folks filing from the US, you are going to need to have proof of residency in a foreign country or prove that you were physically present in a foreign country for 330 days in a 12-month period in order to qualify for expatriate status. This could include residency permits or ID cards or a travel calendar explaining which countries you were present in throughout the tax year. Another key item to have available is the exchange rates, either daily (if using the daily exchange rate) or annual exchange rates. The other major tax savings can come from an expat’s ability to deduct part of his/her housing expenses; as such, you will want to keep records for rents paid, utility costs (excluding telephone) and insurance costs.[back to top]
What foreign exchange rate should I use?
The IRS requires all income or expenses to be reported in US dollars. The IRS accepts two methods of dollarization on expat tax returns, both of which have the potential to bring tax savings. The IRS prefers that you itemize all income and expenses and use the exchange rate on the day payment was made or received. That said, there is the option to total all of your income or expenses and use the average annual exchange rate *if your income and expenses are earned or paid evenly over the year*. You need to look at both exchange rates and see which will convert your income into the lowest USD amount.[back to top]