What American Expats Need to Know About Taxes
For American citizens, when the month of April rolls around there is only one thing really on the mind: taxes. For those who filed early, this is no problem, but for the majority of the population, the clock is now ticking.
For American expats living overseas, this can be an even more confusing and troublesome period, as they are not exempt from filing despite living in another country. However, finding clear information about how their tax situation stands is often difficult. There are many things you will need to take into account before filing your US taxes, including:
- Must you file? What is the minimum threshold?
- When exactly are taxes due?
- What is the maximum you can earn before the US will tax your foreign income?
- Do you still need to file state or local taxes?
There is some good news. Overseas Americans automatically have an additional two months to file taxes. In addition, you can get an entire 6 month extension if you file form 4868 to request such. However, note that if you decide to file later the amount you may owe will collect interest during the period.
The minimums change every year and if you only make a small amount it is always wise to check and see if you must file. Your maximum income before you must file will depend on many things including your age and if you are married. For the majority of citizens, the chart below applies:
If the above does not apply to you, the best source to see if you need to file comes direct from the IRS itself here.
The date for taxes, usually April 15, has been extended a few days until the 18th. For all dates, you can check out the site efile.com or see the chart below:
More good news for expats: your foreign earned income will not automatically be subject to US taxes. That’s right, for the first $91,500 of earned income you will not need to pay taxes, you just need to file and let the IRS know. After that amount you will likely owe, and it is at that point the need for a tax professional is much more necessary to ensure you are not paying more than you must.
Filing state taxes can be even more confusing. Many states will still consider you a resident for tax purposes if you own property, have a drivers license, or qualify any other of their many criteria, even if you’ve lived abroad for years! For information on your specific state, consult with a tax professional or try to find the information online or through your state website. Don’t assume you no longer need to pay state taxes while living abroad, if you do return to the US you may have a very unwelcome surprise.
In the last few years the US government has begun cracking down on Americans abroad who are not paying their taxes. If you are caught you may have to endure hefty fines and a long process to legalize your tax status again. For that reason it is very important you stay up to date on your requirements and consult a professional if necessary.
Some other tax websites that may help:
And to find a tax professional who can help you get your things in order, get a free quote here
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