The Top 3 Tips for Expats Filing Taxes
February 24, 2016 : Eric Scali – The Tax Institute
The New Year is in full swing. No matter what state your resolutions are in, it’s tax season regardless. Furthermore, it’s tax season for all U.S. citizens – even those living abroad.
If that’s you – an expat – you may know first hand that you don’t have all of the same resources when it comes to filing U.S. taxes. That is where H&R Block Expat Tax Services can fit the bill.
Offering virtual, year-round tax preparation, our experts provide a seamless experience for Expats living thousands of miles away from the States. There are just a few items that every Expat should consider when getting ready for the upcoming tax season.
Tip #1: Determine whether you need to file a Tax Return or Report of Foreign Bank and Financial Accounts (FBAR).
In most cases the answer to at least one of these questions is going to be yes.
FBAR reports are required when the total aggregate balances of all of your foreign financial accounts on any given day throughout the year exceeds $10,000.
The typical accounts included in reporting are your bank, investments and retirement accounts. It is important to remember that the threshold applies to all accounts you own separately and jointly, as well as those accounts which you may not own or have a financial interest in, but do have signature authority over. An example of the latter would include bank accounts that you are in charge of at your place of employment or through a business in which you have an interest.
Tax return filing requirements, on the other hand, vary depending on your age and marital status.
If you are under the age of 65 and are filing as single, the threshold for filing a return is $10,300. On the other hand, if you are filing separately from your spouse because he or she is a nonresident of the U.S., the filing threshold is only $4,000. It is important to keep in mind when determining whether you meet the filing threshold, you must take all of your gross income into account before any available income exclusions are applied. Read more about how to determine whether you need to file a U.S. tax return.
Tip #2: Gather all the necessary tax documents to file your U.S. return and FBAR.
This can be tricky. Taxpayers who live in the U.S. benefit from having most, if not all, of their tax documents supplied to them on government-issued forms. That’s not always the case for expats.
Generally, you will need to obtain documents that report income earned throughout the 2015 calendar year. If you live in a country that also uses the calendar year for filing taxes, the documents reporting wage and salary income may be easy to obtain. However, if you are living in a country that uses a fiscal year for tax filing, usually a combination of official tax statements and end-of-year pay slips must be used to calculate the income earned during the calendar year.
It may also be harder to obtain tax statements from your foreign bank. Foreign stock sales, interest and dividends must all be reported on your U.S. return. Many foreign countries do not provide annual tax statements for these types of income, and others that do so may not provide the necessary information you need for your U.S. filing. Instead, you will need to acquire statements from your foreign bank that report these items of income on a calendar year basis. Whether that is monthly, quarterly or annual statements, you must make sure the report includes:
- Investment Income
- Stock sale transactions
- Maximum account balances
Tip #3: Know the tax deadlines and start the tax filing process as soon as possible.
The standard deadline for filing your 2015 U.S. tax return is April 18, 2016. However, if you live outside of the U.S. on this date you get an automatic two-month extension to June 15 to file your return. If you still need more time, you can file an extension to October 17 so long as the request is submitted by your original filing due date (either April 18 or June 15).
Another important date to mark on your calendar is June 30, 2016. This is the date that your FBAR is due, and there are no applicable extensions available for this form.
Lastly, it is always best to start your tax filing as soon as possible, even if you are still missing a document or two. Many expats start the filing process later on in the filing season, so getting in the door early can expedite your virtual tax filing experience. To get your tax filing started, just contact H&R Block Expat Tax Services by clicking on the ‘Get Started’ tab on our website.