Foreign Nationals

U.S. Expatriates

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U.S. Expatriates  
U.S. citizens and Green Card holders living outside the U.S.

To get started, please fill out a tax questionnaire.  

Expatriate Tax Deadlines

• April 15 - Tax payment deadline (for 2011, the deadline is April 17).  After this date, interest will be assessed on any tax due.

• June 15 - Tax filing deadline.  If you cannot file by June 15, an extension can be filed to extend the filing deadline to October 15.  Penalties can be assessed after this date on any tax due.

U.S. Citizens & Green Card Holders must file a U.S. tax return and report worldwide income even if living outside the U.S.  
(unless you don't meet the minimum filing requirements).

However, tax can generally be reduced or eliminated by the: 

• foreign earned income exclusion (for 2011, up to $92,900 per qualifying person (i.e., if you are married and both work abroad, you can each exclude up to $92,900 of earned income),

• foreign housing exclusion (if renting)

• foreign tax credit

The foreign earned income exclusion may be available if you meet either the:

• bona fide resident test (you've lived in a foreign country for over a year, made it your home, and (generally) pay taxes there.  There are no specific time restrictions; for instance, it is possible to be away from your foreign residence for months and still meet the test), or

• physical presence test (you were physically outside the U.S. for 330 days out of any 365 day period and your tax home was abroad).  See below.

Note:  You cannot claim a foreign tax credit or foreign earned income exclusion on the portion of your wages generated during business trips to the U.S.  Any income earned while working in the U.S. is subject to U.S. tax. 

For some people, it is significantly more beneficial to claim the foreign tax credit and not claim the exclusion.  I will determine which is best for you. 

Meeting the physical presence test

You must be out of the U.S. for at least 330 full days in a 365 day period and have your tax home in a foreign country.  For tax year 2011, a 365 period would include the following:  1/1/2011 - 12/31/2011 (the full calendar year), or any 365 day period between 2010/2011 or 2011/2012 (e.g., 11/15/2010 - 11/14/2011, or 5/3/2011 - 5/2/2012).  This leaves you with a maximum of 35 days (including partial days) to spend in the U.S. during a 365 day period.  If your U.S. days exceed that, you will not be able to claim an exclusion, which could cost you thousands of dollars in lost tax savings.  That's why it is very important that you keep track of your travel days into and out of the U.S.  If you are going to take a long trip to the U.S., it is often best to make it near the beginning or end of a calendar year.  Since your maximum exclusion will be reduced if you use an alternative 365 period (see below), I always try to calculate the time period that will give you the largest exclusion.  The days you use to claim the physical presence test can overlap between tax years.  For example, in tax year 2011 you could use the period 5/1/11-4/30/12, and in tax year 2012, you can use the calendar year 1/1/12 - 12/31/12).

Note:  U.S. contractors, such as those working in Iraq and Afghanistan, need to pay special attention to these rules since you often get leave to return to the U.S., which can jeopardize your ability to meet the physical presence test.    

Determining your maximum foreign earned income exclusion  

• If you were working outside the U.S. during a full calendar year (January 1 - December 31, 2011), your maximum exclusion is $92,900.

• If you are using an alternate 365 day period (e.g., August 1, 2010 - July 31, 2011) then your exclusion is prorated (months abroad in 2011 / 12 x $92,900).  In this example, your maximum exclusion would be 7 / 12 x $92,900 = $54,192. 

• If you had business trips to the U.S. in 2011 while working abroad, your exclusion will be reduced by income earned during your U.S. work days.

Foreign Bank and Financial Asset Reporting Requirements

If you had, in all foreign accounts combined, over $10,000 at any time during 2011, you are required to file Form TD F 90-22.1.  I can complete this form for you based on information you provide on my questionnaire, but you will need to mail it to the U.S. Treasury since it is not submitted with the tax return. 

New For Tax Year 2011:  If the total value of your foreign financial assets exceeds the figures below, you are required to file Form 8938 with your tax return. There is some overlap between the foreign bank report (i.e. FBAR or Form TD F 90-22.1) and Form 8938 as they may cover the same foreign financial accounts.  That includes reporting of depository, custodial, or other financial accounts maintained by a foreign financial institution (such as a bank or brokerage company). On Form 8938, you must also include any assets not held in an account maintained by a foreign financial institution including: (1) Shares of a foreign company held directly and not through a broker, (2) interests in foreign entities, (3) loans to foreign persons or entities, (4) any financial instrument or contract held for investment that has a foreign issuer or counterparty. For any income generated from your foreign financial assets, Form 8938 also requires a summary of income reported on the tax return along with Form and line numbers.  See also the instructions to Form 8938.

Total Value of Foreign Financial Assets: Thresholds for Filing Form 8938

Self-Employed Workers: 
Generally, you will still be subject to self-employment tax (social security and Medicare taxes) even if you can exclude all of your earned income for income tax purposes.  However, if there is a social security (totalization) agreement between the U.S. and the country in which you work, and you are covered by social security there on your self-employment income, you might be exempt from U.S. self-employment tax.  Click here for social security agreements.

Can I contribute to a U.S. IRA Retirement Plan?

In order to contribute to an IRA, you must have earned income which is equal to or greater than your contribution.  If you exclude your entire income in a tax year, and also make an IRA contribution, you have to pay an excise tax on that contribution, and the tax will be assessed again in each future tax year until the IRA contribution has been withdrawn.  A way around this is to choose a 12-month period that will not give you a full exclusion of your income, and therefore leave you with enough earned income to meet the requirements to contribute to an IRA.  Also, any days worked in the U.S. on your foreign assignment are not excludable, and so the income generated on those days may be enough to allow you to contribute to the IRA.  This is something I can figure out for you when I prepare your return.

Should I file jointly with my foreign spouse?

When preparing your tax return, I will let you know if it is better to file jointly with your spouse.  It often is if your income is above the $92,900 exclusion or you have substantial non-earned income.  Your spouse's foreign income (if any) would need to be reported, but he/she is also entitled to the same foreign income exclusion/foreign tax credit.

Green Card Holders

If you are a Green Card holder, please refer to this link for information on maintaining your permanent resident status