Taxes for US expats living abroad

Tax help for US expats

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As the annual deadline looms for filing your US tax return, here are a few facts to help ensure your taxes are filed correctly before the IRS catches up.

There are many misconceptions about paying taxes in the US while living and working abroad, US taxation expert Geoffrey DeHaven says.

And despite the fact every US citizen and green card holder is required to file a tax return, DeHaven says about 50 percent of expatriates fail to lodge their tax returns.

There are two main reasons for this. Firstly, many expatriates are unaware of these obligations, thinking that as an expat they do not need to pay or lodge tax returns in the US.

Secondly, expatriates who have not filed a tax return for several years may be reluctant to do so now for fear of being fined for the years they missed.

Democrats Abroad Belgium (DAB) is thus organising its 3rd annual tax seminar on 4 April aimed at steering expats through the subtleties and difficulties in completing federal tax returns.

And on hand for expert advice will be US Tax Abroad representative DeHaven.

Fears unfounded

Though expats might be apprehensive that filing a US tax return after a lapse of several years might result in fines, DeHaven says this fear is at times unfounded.

"Ten to 15 percent of our clients every year have been out of the US system and are interested in being compliant again," DeHaven says.

If an expatriate wants to become compliant again after several years, he or she will be charged the money owed and fined for late filling.

However, this fine can be waived in some cases. But as this is a case by case procedure, it is advisable to see professional advice.

Compulsory declarations

Approximately half of the tax returns filed from overseas are not taxable. Nevertheless, it is compulsory to declare your yearly income to the IRS.

An expat can be granted an exemption from having to file each year, but only if specific circumstances are met such as filing status, age and other particular circumstances.

For example, a single, self-supporting US citizen living in Belgium and earning a gross income of USD 8,200 may not need to file if he or she does not have additional self-employment income of USD 400 or more and does not have one or more foreign financial accounts of more than USD 10,000.  

The foreign-earned income exclusion is also a tricky area.

"Many US filers overseas are under the mistaken impression that because their income is being taxed by a foreign country or their wage is below the USD 80,000 foreign earned income exclusion, there is no need to file their returns," DeHaven says.

"What they fail to realise is that the foreign-earned income exclusion is an option that has to be made."

In short, the foreign-earned income exclusion is not automatic and – to make matters worse – once the IRS has made a note of the fact an expat has failed to file their tax return, a claim of exclusion for that year will not be accepted.

Deadline looms

US citizens and green card holders must lodge their tax returns by 15 April.

However, US expats living abroad may gain a two-month extension until 15 June if a document confirming a taxpayer's expat status is lodged with US tax authorities.

Two more extensions can also be obtained:

  •     a six-month extension until 15 October, on request;
  •     a final extension, until 15 December, by filling in form 2868.

These rules are, however, subject to variations from state to state.

Late payment interest

In the event that a balance is due to be paid without an extension, interest will be calculated starting from 15 April and until the payment is received. Penalties are calculated.

"If the payment is not made by 15 June, there will be a 0.05 percent penalty for each month the balance remains unpaid. If an extension is not obtained, a 5 percent late filing penalty will also apply per month or portion thereof," DeHaven says.

"Both of these penalties combined will not exceed 47.5 percent of the tax due. There is no late filing penalty if there is no balance due."

Other useful websites


Geoffrey DeHaven / Expatica

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2 Comments To This Article

  • Louis Hanna posted:

    on 20th June 2014, 12:05:33 - Reply

    This is mostly what US expats or American citizen living on foreign countries have trouble with - taxes. The article is very informative and definitely a great resource to keep. Thanks!

    - Louis H. -
    Do foreign expatriates do a tax return yearly?
  • Alice Shen posted:

    on 8th May 2012, 12:03:32 - Reply

    Thanks for the article. Quite informative, and I was even more pleased to have received quick reply to my personal question. :)