I. Why And How You Can Benefit From Reading This Guide
US expat tax laws can be tricky. What appears to be a full grasp of a particular issue may in fact prove incomplete or misleading—with civil and/or criminal consequences. This guide is designed to steer you toward accurate and current information to avoid missteps and mishaps.
II. Snapshots Of The Wily World Of Expat Taxation
It’s not just being an expat. It’s also where you’re an expat. From Australia to Asia and everywhere else around the globe, it’s critically important to understand and comply with the rules of that foreign country as well as those of the US.
III. Nuts-And-Bolts Of Expat Tax Issues And Requirements: Pressing And Emergent Issues Facing Expats
It’s a very complicated canvas of rules, regulations, exceptions, and in too many cases, trap doors. Unless you or an existing trusted advisor can address all this with clarity, competency and currency, you can experience exasperating difficulties sooner rather than later.
IV. How To Make Sure You’re Getting Accurate And Timely Advice From Trusted Professionals
It’s more important than ever for expats to be aware of and educated about tax issues that are likely to keep growing. Getting dated—and therefore inaccurate—advice from a tax advisor can create many unhappy returns going forward. It’s imperative for a tax advisor to serve as a warrior-protector of sorts, to ensure that the right information is relayed at the right time.
V. About Freeman Tax Law
If you’re reading this ebook, you undoubtedly have questions. We have answers that will stand up to IRS/Treasury Department scrutiny while protecting you in every way.
VI. Required Forms and Relevant Resources
When it comes to expatriate tax ramifications and responsibilities, what you do know can hurt you as much as what you don’t know. That’s because US tax laws can be tricky, and what appears to be a full grasp of a particular issue may in fact prove incomplete or misleading—with civil and/or criminal consequences.
As an April 2015 article in WSJ.com, “On the Trail of the Elusive U.S. Expat Taxpayer,” points out, “The U.S. State Department estimates there are about 7.6 million American expats living abroad, excluding military personnel, but the Internal Revenue Service typically hears from fewer than a million of them, indicating that many who owe U.S. taxes aren’t paying them...The United States stands alone as the only major country in the world that taxes its citizens wherever they live for as long as they live, unless they renounce their American citizenship. Many American expatriates targeted simply didn’t even know they were expected to file US Taxes. Others who had been dutifully filing found themselves in trouble because they had failed to inform the IRS of one or more non-U.S. bank accounts they held, which expats are expected to do by means of an ‘FBAR’ (Foreign Bank Account Report).”
What the IRS doesn’t know—yet—also increasingly will come back to bite taxpayers in the butt—as enforcement efforts are accelerating rapidly.
The IRS has new powers to prosecute. A June 2015 money.cnn.com article notes, “...the United States has a worldwide tax system, meaning every U.S. taxpayer must report all his income regardless of where it was earned...starting this year the IRS will have enhanced capacity to enforce [disclosure laws], thanks to the Foreign Account Tax Compliance Act (FATCA)...Under FATCA, the U.S. Treasury has struck agreements with more than 100 countries that require those countries’ financial institutions to report back to the IRS on any accounts held by U.S. taxpayers, which include...U.S. ex-pats.”
Bite Is Bigger Than The Bark
Under these new regulations, when the IRS bites, it can be big...very big. As the June money.cnn.com article reports, “Imagine owing up to $600,000 in penalties on, say, a $20,000 bank account simply because you didn’t report it to the IRS. It sounds unbelievable. But such a gobsmacking penalty is possible if your account has been held overseas at a non-U.S. financial institution for years and you knowingly never disclosed it to the U.S. government...You could be subject to lesser penalties if you voluntarily disclose the account or can prove you weren’t being ‘willful’ by not disclosing it.”
Hope For The Non-Compliant
For those who’ve never complied, there is currently a streamlined procedure for people living overseas. It’s possible to clean up and catch up by filing all past and currently due Foreign Bank Account Reports, and be subject only to the taxes owed, without penalties. That can be a massive savings, as the whopping 3,000% penalty described above illustrates.
Use this guide as a one-stop shop to address your expat tax circumstances and needs—in other words, to get a clear big picture. Here are a few primary tips to help get and stay on top of US expat taxation:
- Get clear about your status now. With powerful new legal clout and a mandate to collect more of the uncollected taxes from expats, the IRS will not be ignored. Do you really want to contend with a $600,000 tax tab on $20,000 of income per the Money.CNN example above? Unless you’re already a US expat tax professional, consult one—and we don’t mean the first one that catches your eye. Check candidates out thoroughly (more about this later).
- Seek tax and legal assistance if there’s any hint of delinquent reporting or payment—or just as a double check to make sure you’re okay. This is one case where having an advisor keenly knowledgeable about—and able to help with—both US expat taxation and legal challenges can be worth its weight in gold (sometimes literally).
- Don’t be dismissive about this vitally important issue. This isn’t a come-on for using the services of our firm. In fact, if you hire a qualified competitor as a result of reading this guide, we’ve done our job.
- Avoid complacency in the future. Even if you’re current on all obligations now, massive pressure is likely to mount on and by the IRS to vastly improve collections from the roughly 87% of US expats now in violation (calculated on the WSJ.com figure of fewer than one million compliant out of a total of 7.6 million). With that likely will come new regulations, twists and turns, and ways to squeeze more taxes out of US expats.
- Be consistent going forward. Past compliance doesn’t ensure future “good graces.” While a track record of compliance may help if there’s a problem down the road, it’s not likely to radically mitigate the problem. That said, however, there already are discussions of compromises—inasmuch as the IRS doesn’t have the manpower to attempt collection of all 87% of the “non-compliant” souls out there. They’re still trying to uncover what’s what. But that doesn’t mean you should roll the dice.
- Plan ahead if you’re not yet an expat. This is the surest way to get and stay in compliance. Just as packing your suitcases, buttoning down accommodations, locking up job/contract details and all the rest of it, understanding your US expat tax obligations now will save potentially a huge amount of heartache, headache, and dollar-depletion later.
It’s not just being an expat. It’s also where you’re an expat. From Australia to Asia and everywhere else around the globe, it’s critically important to understand and comply with the rules of that foreign country as well as those of the US. It’s enough to make your head spin around and around...and that’s on a good day. So, unless you know it all, be prepared to get quality, trustworthy assistance from advisors who know and understand your specific circumstances in your specific country—and how to structure a tax plan to your best benefit.
To start the head-spinning, here are three snapshots looking at the world of US expat taxation:
1. Living Abroad? Expat Taxpayers Face Special Challenges
“The complicated world of US tax law becomes even more complex for American citizens living overseas...For frequent traveler Rebekah Voss, tax time poses a particular set of challenges. Voss publishes The Happy Passport, a travel inspiration website for women, and has spent a significant amount of time in Vietnam, Thailand and other exotic locales...Before even beginning her tax return, however, Voss found that the standard method of gathering receipts to track expenses simply wasn’t realistic for her situation... ‘In a lot of places in Asia, cash is king. You can’t pay with a credit card; your only option is to pay with cash. You’re not given a receipt, or you’re given a handwritten receipt, if you’re able to get one... Voss isn’t the only traveler who’s been weighed down by receipts, tickets and hotel check-in forms in the anticipation of future tax needs, and been stymied by the difficulty in managing them...in addition to income and expenses, expats face additional reporting requirements, including reporting any foreign bank accounts, plus non-U.S. mutual funds, pensions and investments...U.S. taxpayers with foreign sources of income may also be subject to income tax in their host country...Future expats (temporary or otherwise) would be well-served to have a plan in place before heading abroad.” Source: money.usnews.com/money/personal-finance/articles, 2.24.15
2. Everything US Expats Need to Know About IRS Tax Forms (But Were Afraid to Ask)
“Overseas Americans are no exception, as practically all Americans with any income anywhere in the universe are required to file a U.S. tax return. As most expats are painfully aware, this process is not only more complicated than for their compatriots back home, but the risks and potential penalties are higher even for simple mistakes...If you are new overseas and have been working with a domestic tax preparer, you may want to consider switching to a firm that specializes in preparing tax returns for overseas Americans and who also have experience in the country you live in, if your current preparer does not...you may be able to exclude up to $99,200 of earned income in 2014 and a portion of your foreign housing expenses from U.S. income tax. Note that this exclusion does not apply to self-employment taxes. If you are self-employed abroad, you are still subject to U.S. Social Security taxes unless you live in one of the 25 countries with which the U.S. has a Social Security Totalization Agreement. The Foreign Earned Income Exlusion (FEIE) is generally advantageous to use when income tax rates in the foreign country are lower than in the U.S. and/or your total earned income is below the exclusion threshold.” Source: blogs.wsj.com/expat, 2.23.15
3. Foreign Country Quirks And Complications...Australia Is Just One Example
“With few exceptions, those who are working in Australia must maintain a superannuation fund. [Superannuation in Australia refers to the arrangements people make in Australia to accrue funds to replace their income in retirement. Superannuation in Australia is government-supported and encouraged, and minimum provisions are compulsory for employees.]...If you are an Expat who is at least 18 years old and living and working in Australia, you are required to make contributions to the Australian superannuation fund unless you have a certificate of coverage in place which makes you exempt...There is a lot of gray when determining the US tax liability on superannuation funds. The Australian superannuation is regarded by the IRS as a type of trust, and there are some variables that determine your tax liability...If you are confused about what should be reported or how to report it, make sure to get in touch with an experienced US expat tax professional.” Source: taxesforexpats.com/articles, 9.25.15
Below is an overview of what expats need to be aware of, and beware of, when it comes to tax issues and requirements. As you may determine sooner than later, it’s a very complicated assortment of rules, regulations, exceptions, and in too many cases, trap doors. Unless you or an existing trusted advisor can address all this with clarity, competency and currency, find a tax law advisor who can.
First off, make sure to:
- File a tax return or required Foreign Account Tax Compliance Act (FATCA) and Foreign Bank Account Report (FBAR) reports in a timely fashion;
- Take allowable credits or deductions. In many cases, the Foreign Tax Credit and Foreign Earned Income Exclusion will substantially reduce tax impact. If paying income taxes required in a foreign country, this can reduce US tax liability. There are myriad deductions and credits that may help US expats. It’s definitely worth the time to explore how to take advantage of as many as possible;
- State a correct filing status (e.g., married/filing jointly, single)
Starter List Of Tax Documents To Assemble When Ready To File:
- Previous year US tax return;
- US tax documents including W-2, 1099, K-1 and the like;
- Statements of accounts tied to foreign financial institutions, which help determine FBAR reporting;
- Wage statements from the foreign country in which the work was performed.
Who Must File
US expats can run, but they cannot hide. As US citizens, expats are typically liable for US income tax anywhere in the world. Under certain conditions, described in more detail below, exclusions, deductions and reductions apply.
Self-Employed Persons Abroad
Those making $400 or more of self-employment must file regardless of age, and pay self-employment tax even if income is excludable as foreign earned income. Net earnings from self-employment include the income earned abroad and in the US.
Estimated Taxes While Abroad
Expats working abroad for a foreign employer may have to pay estimated tax, since not all foreign employers withhold US taxes.
Typically, tax home is the primary location of business, employment, or post of duty where an expat is permanently or indefinitely working. Expats don’t have a tax home in a foreign country for any period where the regular living abode is in the US during which the abode (the place of regular residence) is in the United States. However, temporary US presence or maintaining a dwelling in the US does not necessarily qualify for tax home status.
Waiver Of Time Requirements
Expats leaving a foreign country because of war, civil conflict or other legitimate adverse conditions that prevent conducting normal business may not have to meet the minimum time requirements for bona-fide residence or physical presence.
US Withholding Tax
US payers of benefits from employer-deferred compensation plans (such as employer pension, annuity, or profit-sharing plans), individual retirement plans, and commercial annuities must withhold income tax from payments or distributions most of the time. Withholding will not apply if an expat opts for exemption, conditioned upon providing certification to the payer that the expat is not a US citizen, resident alien or someone who left the country to avoid tax. For rules applying to non-periodic distributions from qualified employer plans and tax-sheltered annuity plans, review Publication 575, Pension and Annuity Income (Including Simplified General Rule).
For more detailed IRS information on expat income exclusions and deductions, click here
Earned Income Exclusion
Expats may qualify for the foreign earned income exclusion of up to $100,800 in 2015 for income earned while working abroad, subject to filing a tax return. In general, foreign earned income is income received from services performed outside the US and its 16 territories. Generally, expats will qualify for these benefits if the tax home (defined above) is in a foreign country throughout a period of bona-fide foreign residence or physical presence and one of these conditions exist:
- A US citizen who is a bona-fide resident of a foreign country for an uninterrupted, complete tax year;
- A US resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona-fide resident of a foreign country for an uninterrupted period of an entire tax year;
- A US citizen or resident alien physically present in a foreign country for at least 330 full days during any period of 12 consecutive months.
Exclusion Of Foreign Earned Income
If an expat’s tax home is in a foreign country and the expat meets either the bona-fide residence test or the physical presence test, a limited amount of foreign earned income may be excluded from gross income. The income must be for services performed in a foreign country during a period either of foreign residence or presence. Pay received as an employee of the US Government, its agencies or for services abroad for Armed Forces exchanges, U.S. Army, Navy, or Air Force cannot be excluded. Those claiming the exclusion cannot claim any credits or deductions that are related to the excluded income. A calendar year-long foreign residence plus bona-fide residence qualification or physical presence test enables excluding foreign income up to $100,800.
Foreign Housing Exclusion
Bona-fide resident or physically-present expats may be able to claim a foreign housing exclusion or gross income deduction. Allowable housing expenses include reasonable expenses (such as rent, utilities other than telephone charges, and real and personal property insurance) paid or incurred during the tax year. The base amount for 2015 is $16,128 or $44.19 per day. To figure the base amount, multiply $44.19 by the number of days applicable within a tax year.
Choosing The Exclusion(s)
Expats can choose to exclude foreign earned income and/or to exclude or deduct the foreign housing amount. Those choosing to take both must figure foreign housing exclusion first. Once a choice is made, it’s in effect for that year and future years unless the expat revokes it. Once a choice is revoked, the exclusion can’t be claimed again for five years without IRS approval.
Foreign Income Taxes
Expats can credit a limited amount of foreign income against US tax liability, or deduct it in calculating taxable income on a US tax return. Most often, it’s better to take a credit for foreign taxes versus deducting them.
For the credit, complete Form 1116, Foreign Tax Credit, (Individual, Estate, Trust, or Nonresident Alien Individual), and include with a US income tax return.
Expats running afoul of US travel restrictions will not be able to claim bona-fide resident status or being physically present during any period in a country where US citizens and residents are barred from traveling or engaging in commerce. In this scenario, foreign income and housing expense tax deductions and/or credits do not apply.
Filing Extensions While Abroad
Expat citizens with a tax home and abode outside the US are automatically granted an extension, usually to June 15, to file a return and pay any tax due. When filing the return, attach a statement showing eligibility for the automatic extension.
Foreign Bank And Financial Accounts
Expats with bank, securities or other financial services accounts in a foreign country at any time during the tax year, should be prepared to complete Treasury Department Form 114 (formerly known as TD 90-22.1), Report of Foreign Bank and Financial Accounts, and file it electronically at http://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html.
Tax Agreements For Expats
Tax agreements run far and wide, depending on the country involved. Below are links to three resources that can help determine status in a particular country:
Dynamic developments around the globe can and will drive changes to US expats. Turbulent geopolitics can turn yesterday’s foreign friend into foe—and vice versa. For example, chilling of relations with Russia may ultimately impact expat status and requirements in a negative way, while re-establishment of diplomatic relations with Cuba already is positively affecting ability of expats to live and/or work there without running afoul of the hostile country travel restriction provisions that have been in place for decades. A fast-changing world requires constant diligence to stay abreast of evolving expat reporting and requirements.
There also are many evolving challenges within the US—many surrounding the need to find additional sources of revenue to run the government. In turn, this creates pressure on the IRS to collect more taxes. Expats are a logical focus of that effort.
Finally, terrorism financing has substantially increased efforts to track money flow—to ensure that it is part of a lawful activity. With this need for oversight comes more taxation. “If we have to follow the money, why not find ways to tax it and kill two birds with one stone?” seems to be the prevailing mantra.
For all these reasons, it’s more important than ever for expats to be aware of and educated about tax issues that are likely to keep growing.
Getting dated—and therefore inaccurate—advice from a tax advisor can create many unhappy returns going forward. It’s imperative for a tax advisor to serve as a warrior-protector of sorts, to ensure that the right information is relayed at the right time.
Because that information depends in large part on individual circumstances, it’s also critical to work with an advisor who knows what questions to ask, how to create a strategy based on those personalized parameters, and who will stay connected and engaged to ensure that outcomes are correct and current.
How to determine the best fit for your needs:
- Seek both breadth and depth of knowledge. Look for an advisor not only skilled in expat taxation, but everything else that can factor into it—estate planning, negotiating with the IRS from the perspective of those who’ve been on the other side of the table working for the IRS, offshore accounts, audits and criminal tax investigations, offshore banking taxation, estate challenges, wealth management, gift planning, bankruptcy and more. A Wall Street Journal blog post in February 2015 sums up the challenges: “As most expats are painfully aware, this process is not only more complicated than for their compatriots back home, but the risks and potential penalties are higher even for simple mistakes…If you are new overseas and have been working with a domestic tax preparer, you may want to consider switching to a firm that specializes in preparing tax returns for overseas Americans and who also have experience in the country you live in, if your current preparer does not.”
- Get personal instead of perfunctory treatment. Dealing with expat tax issues typically is a very individualized situation. Pat answers won’t do the job. While this may sound like a pitch for cranking up billable hours, it actually is just the opposite. By doing strategic investigation at the beginning, it’s much more feasible to construct a plan that will eliminate a substantial amount of guesswork, streamline the process, and enable expats to legitimately save money on their taxes.
- Make sure they’ve got your back to keep you in front of expat rules of engagement. Different countries have specific, usually complicated, tax requirements affecting US expats. So, it’s not just about having your back in front of the IRS and US Treasury; it’s also about ensuring compliance with the laws of the host country, and connecting any of those efforts to consequent US filing requirements.
- Find an up-to-date, knowledgeable source that knows how to communicate (and educate) in straightforward and understandable ways. The whole expat tax law challenge is “foreign” enough to comprehend as it is, without needlessly adding layers of confusion and complexity.
- Ensure adequate knowledge of, and teamwork between, both legal and accounting specialists. The term “tax law” is just that, especially when it comes to expats. Both legal and accounting issues impact the process. By combining and coordinating the best of both, solid tax law firms can achieve a better outcome to truly cover all the bases for their expat clients.
- Look for well-defined processes and savvy technology. While every situation merits individualized treatment, it’s also vital to have a bulletproof system in place, much like a pilot’s checklist, to ensure everything is covered. As part of this, the advisor needs to have technology in place to permit reliable communication and worldwide access.
Questions...Questions...and more Questions.
- What do I do if I haven’t filed for year(s) and want to “catch up?”
- Are there amnesty programs for non-compliant expats?
- The IRS is bird-dogging me—how do I respond?
- What if I want to give up US citizenship?
- How can I utilize foreign tax credits?
- How do my stock options get handled?
- What happens to my pension?
- How do I assess ability to get a housing allowance?
- Where does reimbursement for expenses come in?
- What happens if I maintain a US residence for my family while I’m living and working abroad?
- What is the “substantial presence” test, and how does it impact taxation?
- What are 8938 and FBAR obligations?
- What is an expatriation tax?
- How do laws in various countries help or hurt the US tax burden?
- Since I live in a foreign country, shouldn’t I find a tax advisor there instead of the US?
While weighty, these questions barely scratch the surface of issues and challenges facing US expats. The issues are complicated, challenging, and filled with landmines.
Freeman Tax Law specializes in expat tax law and its highly complex rules of engagement. We excel at (and revel in) putting together the expat puzzle for our clients; they can spend their time doing what they do instead of having to become ersatz tax authorities.
We have the experience of helping hundreds of expats, in turn providing a deeper familiarity for those unpredictable issues that inevitably arise. Once uncovered and understood, they can be dealt with more effectively going forward.
Freeman Tax Law works predominately with individuals and businesses across the country on domestic and international tax law matters. The firm has helped resolve a wide range of complex tax controversies dealing with delinquent filings, audits and criminal tax investigations, offshore banking taxation, estate challenges, wealth management, gift planning, bankruptcy and more.
Freeman Tax Law offers expats the services of attorneys, former IRS Agents, CPAs, consulting professionals, and a professional staff that collectively have vast experience handling and resolving tax controversies. This team is well-versed in knowledge of IRS procedures, reconstructive accounting, white collar criminal defense, bankruptcy, and estate planning. From this wealth of resources, the firm assembles a team tailor-made to address your needs.
Freeman Tax Law brings a defined process to the table that makes sure we cover all bases, and provides a clear client picture of what we’re doing and where we’re going. Fundamentally, this process includes:
- Information gathering. This is where we collect client tax returns and other pertinent documents to get an initial view of the situation and assess where the client stands presently. A state-of-the-art, secure portal enables efficient and safe sharing of information.
- Succinct workplan. Based on analysis and gaining a good in-depth understanding of the client’s situation, Freeman brings together needed internal resources to create a straightforward work plan to file returns and other needed forms (e.g., 8865, FBAR) and address associated issues. These issues can be very complicated, from having to deal with treaty challenges to determining what income can be excluded from taxation. Everything is double-checked with the IRS to ensure full compliance and to avoid later unpleasant surprises.
- Assembling the puzzle. This includes initial tax return preparation and any associated matters. All returns are reviewed by multiple people within the firm before passing to the client for review. All documents and filings generated are backed up by detailed schedules and a workpaper process for convenient reference if/as needed.
- Moving forward. After dealing with filings, we turn to planning—asking such questions as: From a legal standpoint, where does the client need/want to reside? Is this a short-term or long-term commitment? Is there any way to streamline the process? By getting in front of the situation, we can help expat clients streamline their processes—and lives—going forward.
About The Author
Jeffrey S. Freeman, J.D., LL.M.
Jeffrey S. Freeman, Esq. has personally represented and counseled hundreds of clients throughout the United States on tax matters. Jeff’s objective is to identify root tax collection issues, handle complex tax matters efficiently, creatively and strategically, and provide his clients complete, cost-effective representation and resolution.
Jeff represents clients with a variety of backgrounds and professions. He has successfully negotiated and resolved complex tax controversies for his clients before the IRS and in the Federal Court system, U.S. Tax Court, State Tax Courts, and the U.S. Bankruptcy Court. Further, Jeff has skillfully handled audits with various taxing authorities, the settlement of tax liabilities with the IRS, negotiation of installment agreements, Offer in Compromises, removal of tax liens and levies, sales tax and payroll trust fund tax assessments, innocent spouse relief claims and the removal of penalties and interest for his clients.
Jeff holds a Masters of Law in Taxation (LL.M.) from Georgetown University Law Center in Washington, D.C. and Juris Doctor, Cum Laude, from the Michigan State University College of Law and a Bachelor of Arts in Accounting, with honor, from Michigan State University where he was a member of the Beta Gamma Sigma Business Honor Society and the Phi Kappa Phi Academic Honor Society.
Further, he is a member of the Taxation Section of the American Bar Association and Michigan Bar Association, where he served as a past chair of the Tax Practice and Procedure Committee. In addition to the state courts in Michigan, Jeff is admitted to practice before the United States Federal Court, United States Court of Appeals and in the United States Tax Court.
With national recognition for his work and commentary, Jeff has appeared on the Frank Beckman Show, Fox News, and has been quoted in Newsweek, The Motley Fool, Business Week, the Detroit News, Detroit Free Press, Crain’s Business, and Detroit Business. Over the years, he has authored numerous articles for various professional journals.
He has been named a “Top Lawyer” by Detroit’s dbusiness magazine, and has been the keynote speaker about the Foreign Account Tax Compliance Act (FATCA) at the American Chamber of Commerce in Shanghai, China.
- IRS Tax Guide for U.S. Citizens and Resident Aliens Abroad
- IRS Frequently Asked Questions (FAQs) About International Individual Tax Matters
- US Dept. of Justice Overview Of The Bank Records And Foreign Transactions Act
- Form 1040: U.S. Individual Income Tax Return – This is the official tax form that U.S. taxpayers use to file their annual income tax returns.
- Schedule B: Interest and Ordinary Dividends – This is used to report interest and dividend income you receive during the tax year. It’s important that taxpayers with foreign bank and/or brokerage accounts complete part III.
- Form 1116: Foreign Tax Credit – Allows U.S. taxpayers to take a tax credit and subtract the taxes they paid to another country from whatever they owe the IRS for income taxes.
- Form 2350: Application for Extension of Time To File U.S. Income Tax Return – Citizens and residents abroad use this form to ask for an extension of time to file their tax return only if they expect to file Form 2555 and need time to meet the residency test.
- Form 2555: Foreign Earned Income Exclusion – This is one of the most important forms and is used to reduce taxable income. Citizens and residents living and working outside the U.S. may be entitled to the foreign earned income exclusion if they meet certain residency tests. Also, included in this form is the foreign housing exclusion, which allows citizens and residents to take an exclusion for specified foreign housing expenses.
- Form 3520: Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts – Used to report gifts, inheritances or transactions from a foreign (non U.S.) individual, estate, corporation or partnership.
- Form 4868: Application for Automatic Extension of Time File U.S. Income Tax Return – Used to apply for an extension of time to file an income tax return until October 15.
- Form 5471: Information Return of U.S. Persons with Respect to Certain Foreign Corporations – Used to report information if you own a business, real estate, investment assets through a foreign corporation.
- Form 8621: Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund – Used to report actual distributions and gain as well as income for certain “pooled investments” (mutual funds, insurance products, pension plans) located outside the U.S.
- Form 8938: Statement of Specified Foreign Financial Assets – Used to report your foreign financial assets if the total value is above a specific amount.