5 Things you must know about US Expat Taxes

by James Scott Taxpayers American Living Abroad

Moving to any other country is an amazing opportunity for many Americans to travel the world and live life king size. Whether your motivation is to get your Zen or to take your career to the next level, it is easier than ever to pack up your bags and relocate to a new country as long as you stay compliant with your US expat tax return.

If you earn money in a foreign country and not understanding your US tax obligations can definitely lead to some very serious consequences. But don't worry, we distilled the fundamentals of Tax filing for US citizens living abroad to help them out. There we have mentioned the top 5 things you must know about US expat taxes.

As an Expat, you Receive an automatic Tax Filing Extension Until June 15th

Filing Us Tax Returns When Living Abroad on the tax deadline of April 15th get an extension until June 15th to file. But any US taxes owed are due by April 17th avoid huge penalties and interest. If you come back to the US, you may still be eligible to use certain US expat deductions and exclusions that year. However, you will need to file by April 17th as you are now a US resident.

Having social security the number and paying taxes means you are eligible for COVID 19 stimulus check

You can qualify for a $1,000 COVID stimulus check if you fall within the income threshold and have a social security number and file taxes as the US expat. Nontaxpayers who live abroad may qualify too.

The Foreign Housing Exclusion

If you earn over the foreign earned income exclusion threshold and rent your home abroad, then you can exclude a further amount of your earned income-based on your housing rental expenses and subject to the internal revenue system limits simply by claiming the foreign housing exclusion.

The Foreign Tax Credit

It lets you claim US tax credits up to the same value as foreign taxes that you have paid on the same income. Also, it can be claimed on form 1116 and can be applied to both passive and earned income. But, it can't be applied to the same income as the foreign earned income deductions.

You can amend a previous tax return if you made a mistake

If you find that you have failed to report some of your income on the tax return or even if you did not take all the deductions allowed, you have to file an amended return for that tax year simply by using for 1040X. Keep in mind that filing an amendment before the IRS catches the mistake is the best option as huge penalties are often less. Also, the clock starts ticking as well as the amended return will need to be filed before a certain date in order to seek a refund or credit when the original return has been filed.

Track your Travel Time to Make Sure you Qualify as an Expat

If you are planning to qualify via the physical presence test, must count your travel days very carefully. You have to be physically present inside an overseas country for at least 330 full days, thus any time you spend traveling in the air or even by ship to or from the USA won't count. So, must keep track of the actual dates of travel. Remember, a small mistake in calculations could cost you a huge penalty on your US expat tax return. So, you can go to American expat tax services at any time.