James Maertin, C.P.A.

  U.S. Tax Preparation Worldwide

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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.  After this date, interest will be assessed on any tax due.    FBAR (Foreign Bank and Financial Account Reporting) is due.

  • June 15 - Tax filing deadline.  If you cannot file by then, 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 tax year 2016, up to $101,300 per qualifying person (i.e., if you are married and both work abroad, you may be able to each exclude up to $101,300 of your 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 an entire calendar 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. 

 

Meeting the physical presence test and determining your maximum foreign earned income exclusion  

  • If your tax home was in a foreign country and you were outside the U.S. for at least 330 days in the full calendar year (January 1 - December 31, 2016), then your maximum exclusion for 2016 is $101,300.  If you are married and both work, then you each get a maximum exclusion of $101,300 (it is not combined).

  • If you don't meet the above test, then you may use an alternate 365 day period for a prorated exclusion (i.e., for tax year 2015, you would use a 365 day period either between 2015-2016 or 2016-2017).  For instance, if you were outside the U.S. for at least 330 days during the period of August 1, 2016 - July 31, 2017, then your maximum exclusion will be calculated as follows:  There are 153 days from Aug 1, 2016 - Dec 31, 2016, so 153 / 365 x $101,300 = $42,463, which is your maximum exclusion using this 365 day period.  Since your maximum exclusion will be reduced if you use an alternate 365 period, I always try to calculate the time period that gives you the largest exclusion.  If your alternate period includes a date in 2017 that has not yet passed, you may need to file an extension because you cannot file your tax return until you have met the physical presence test.

  • Remember, 330 days outside of the U.S. in a calendar year (or an alternate 365 day period) means that you can only spend a maximum of 35 days in the U.S., including partial days. 

  • If you had business trips to the U.S. in 2016 while working for your foreign employer, your exclusion will be reduced by income earned in the U.S. during those trips.

  • If your foreign earned income was greater than the maximum foreign earned income exclusion, then you may also be able to claim a foreign tax credit and/or a foreign housing exclusion.

  • Sometimes it works out better not to claim the foreign earned income exclusion and just claim a foreign tax credit.  However, if you were previously claiming the exclusion and then decide to not do so one year, it is considered a revocation and you may not be able to claim the exclusion for the next five tax years. 

Bona fide foreign residency  

  • If you are a bona fide resident of a foreign country, then you do not need to meet the physical presence test.  You can have more lengthy trips to the U.S.  Your maximum exclusion for 2016 is $101,300.

  • If you had business trips to the U.S. in 2016 while working for your foreign employer, your exclusion will be reduced by any income earned in the U.S. during those business trips. 

  • If your foreign earned income was greater than the maximum foreign earned income exclusion of $101,300 (2016), then you may also be able to claim a foreign tax credit and/or a foreign housing exclusion.

  • Sometimes it works out better to just use the foreign tax credit and not claim the foreign earned income exclusion.  However, if you were previously claiming the exclusion and then decide to not do so one year, it is considered a revocation and you may not be able to claim the exclusion for the next five tax years. 

If you don't meet the physical presence test or the bona fide resident test

  • Your only option would be to claim a foreign tax credit for any foreign income taxes that you paid on your foreign earned income.

  • If you were working in a foreign country paying an income tax rate that was higher than the rate would be in the U.S., then in general, you are likely to receive a full foreign tax credit for those foreign taxes that you paid on your income.  If you are working in foreign country paying an income tax rate that is less than the rate would be in the U.S., then in general, you would owe the difference in tax to the IRS.  If you spent any time working in the U.S. for your foreign employer, then that income is not available for a foreign tax credit.

Report of Foreign Bank and Financial Accounts (FBAR)

 

If you are a U.S. citizen, resident, or entity, and the aggregate value of all your foreign financial accounts exceeded $10,000 at any time during the calendar year to be reported, you are required to file an FBAR (Form 114).  Please download the expatriate tax questionnaire where you can enter your foreign accounts.    Effective July 1, 2013, the FBAR must be filed electronically through FinCENís BSA E-Filing System or through authorized tax software. The FBAR is not filed with a federal tax return.  It is due on April 15 of each tax year, but an automatic extension may be granted to October 15.  For detailed information on FBAR filing requirements, please see Foreign account and foreign asset reporting

 

Statement of Specified Foreign Financial Assets (Form 8938)

 

As of tax year 2011, you may be required to file Form 8938 as part of your individual tax return if you meet foreign financial asset threshold requirements.  There is some overlap between the FBAR and Form 8938 as they may cover the same foreign financial accounts.  For detailed information on Form 8938 filing requirements, please see Foreign account and foreign asset reporting

 

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 $101,300 exclusion (2016) 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 see maintaining permanent residence status and international travel as a permanent resident.