US Expats - What Must I Report to the IRS? Any Tips?

If you live and work outside the U.S., you may still need to file a U.S. tax return if you have ANY foreign earned income, interest income, investment income, foreign capital gains, foreign trust income, foreign brokerage securities account income, etc.

Per the IRS Tax Tip Publication #2014-13, read about some of the filing pointers below.

1. Report Worldwide Income. By U.S. law, U.S. citizens and resident aliens must include all and report all worldwide income. As mentioned above, this includes income from wages, salaries, self-employment income, trust income, bank account income, brokerage account income, dividends, and income from corporations and partnerships.

2. File the Required Tax Forms. In addition to your IRS 1040 or 1040-NR tax returns, you may need to file IRS Schedule B, Interest and Ordinary Dividends, IRS Form 8938, Statement of Specified Foreign Financial Assets, and the U.S. Treasury Department FinCEN Form 114 (formerly called the "FBAR" form), The Report of Foreign Bank And Financial Accounts, with your U.S. tax return.

As an expat, you may reduce your taxes by using several IRS forms that give taxpayers certain expat benefits. These include Form 2555, Foreign Earned Income Exclusion and the Form 1116, Foreign Tax Credit to receive U.S. tax credit for taxes you paid to a foreign government. See below for additional information.

3. Consider the Automatic Filing Extension. If you live abroad and cannot meet the April 15th filing deadline, you may qualify for an automatic 2 month filing extension. You will then have until June 15th, 2015 to file your U.S. tax return.

This extension also applies to anybody serving in the U.S. military outside the U.S.

You will need to attach a statement to your tax return explaining why you qualify for the automatic extension.

4. Review the Foreign Earned Income Exclusion. If you live and work abroad, you may qualify for the "Foreign Earned Income Exclusion." This benefit allows any expat to exclude earned income from abroad on IRS Form 2555 up to the annual limit from U.S. income tax.

5. Don't Overlook Credits and Deductions. You may be able to take a tax credit or a deduction for income taxes you paid to a foreign country. These benefits can reduce the amount of U.S. income taxes you pay if both countries tax the same income.

6. Moving Costs Abroad. You may be able to deduct or receive credit for some of your moving costs to your residence abroad if you moved for work reasons.

What other forms do U.S. Expats need to file? We will cover some forms in our next blog.....so stay tuned!

David Garber, IRS Enrolled Agent - 7th Floor Expat Tax Service


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