The US ‘Tax Day’ is only a few weeks away. US Expats may have an automatic filing extension, but that doesn’t mean you should sit back and leave everything to the last minute. There are a number of different forms you may need to file and a wide variety of deductions and exclusions you must be aware of.
Do you need to file an Foreign Bank Account Report (FBAR) or a Foreign Account Tax Compliance Act (FATCA)?
If you’re a US Expat you may have already heard of an ‘FBAR’ or/and an ‘FATCA’. However, you may be confused about what exactly they are and whether you have to file one.
Foreign Bank Account Report (FBAR)
The FBAR form is used to report any foreign bank account information you may have to the US Treasury Department> The form must be filed annually by US individuals and businesses who own or have an interest in foreign bank or financial accounts that exceed $10,000 at any point during the calendar year. The FBAR deadline will be due on the 18th April this year. For US expats the automatic deadline extension until the 15th July 2017.
Foreign Account Tax Compliance (FATCA)
The FATCA (8938) form is used to report any foreign financial accounts that you may have. You must file the form if your foreign assets are greater than $200,000 on the last day of the tax year or over $300,000 at any point during the year for single or married filing separately taxpayers. For married filing jointly taxpayers, you must file the FATCA form if the value of your foreign assets are greater than $400,000 on the last day of the year or more than $600,000 at any point during the year.
Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC)
Another area many US Expatriates struggle to understand is FEIE and FTC. Luckily for US Expats, there are a number of tax credits, deductions and exclusions these are classed under either FEIE or FTC.
Foreign Earned Income Exclusion (FEIE)
FEIE can be used to reduce or eliminate the risk of being taxed by both your host country and the US. FEIE can exclude up to $101,300 of your foreign earned income on your US tax return. To do so you must pass either the Physical Presence Test or the Bona Fide Residence Test.
Foreign Tax Credit (FTC)
FTC can be used to reduce your US tax liability on your foreign earned income. You cannot claim FTC against income you have already excluded through FEIE.