As an American citizen, you’ll have to pay income tax on worldwide income when traveling abroad. Find out what you should know before relocating in this article.
As an American living abroad, how do I keep from being taxed twice?
To minimize or eliminate your tax liability as an American living abroad, you’ll want to take measures to avoid double taxation of your overseas income. The following are a few provisions that, depending on the specifics, can help American expats avoid double taxation:
- The Exclusion for Earned Income Abroad
- The Concept of a Foreign Tax Credit
- The Exclusion of Foreign Housing
- Tax treaties with the United States
What is the tax deadline for U.S Expats?
If you are a U.S. citizen or dual citizen residing abroad and need to file a tax return in the United States, there are four dates you must keep in mind. If you are a U.S. citizen or resident filing a tax return based on the calendar year, you have until May 17th to do so. If, however, your fiscal year ends on any day other than December 31st, your filing deadline is three months and fifteen days after the conclusion of your fiscal year. Remember that the tax payment is due on the same day as the tax return is due.
How do I find out if the IRS has received and processed my tax paperwork?
Neither will you receive a confirmation from the IRS that they have received your paperwork. In fact, it’s preferable that you don’t hear from the IRS at all, as they’ll only get in touch if there are any of the following issues with your tax return:
- There is still a balance owed to you.
- A larger or smaller refund is payable to you.
- Your tax return prompted an IRS inquiry.
- The IRS requires identity confirmation.
- The Internal Revenue Service is requesting further data.
- Interruption of your return due to IRS alterations
- The IRS is obligated to inform you of any holdups in processing your return.
If I don’t submit my taxes as a US expat, would I face any fines or penalties?
If you’re submitting late taxes as a US expat, but within 60 days of your U.S. expat return due date, this will normally equal 5% of the amount of unpaid tax. For example, U.S. expats in Hong Kong have to pay fines even if they are residing in Hong Kong.
Each additional month the return is overdue will incur the same penalty, up to a maximum of 25% of the total tax due. If you miss the deadline by more than 60 days, you’ll have to pay the greater of 100% of the outstanding amount or $135.
Can I avoid U.S. taxes by renouncing my citizenship?
Even if you renounce U.S. citizenship, you must pay taxes. Your non-resident status is temporary due to prior obligations. The IRS and Treasury Department must receive Form 8854 if your tax status has changed. The IRS considers you a citizen until you file this form. Permanent residents follow the same rules. After renouncing citizenship, submit the necessary documentation.
U.S. citizens and green card holders living abroad must report all income. If you move abroad, you must file a U.S. tax return and report all income. Five years of filing form 8854 and paying taxes are required. If you don’t, the IRS may audit you as a “covered expatriate” and tax your gifts to U.S. residents and asset sales.
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