US EXPAT TAX
SAVING US EXPATS MONEY FOR OVER 10 YEARS.
US Expats are unique when it comes to taxes. There are a number of unique expenses, deductions and reliefs that are available to US Expats. We specialise in providing a tailored US Tax service that focuses on minimising tax owed and maximising on the US tax incentives and reliefs available.
OUR US OFFICE
85 Delancey Street, Floor 2, New York, NY 10002, United States of America
7 Henrietta Street, London, England, WC2E 8PS, United Kingdom
7th June 2017
Why Donald Trumps tax policies on expats will be HUGE boost for Britain
When do you have to file a US Expat Tax Return?
OUR EXPERT US EXPAT TAX KNOWLEDGE CANNOT BE BEATEN
Born in the USA
If you were born in the US you will be a US citizen and you are required to submit a US tax return every year - even if you are living overseas and paying all your taxes in that country.
GREEN CARD TEST
As a Green Card holder, you are generally required to file a US income tax return and report worldwide income no matter where you live.
SUBSTANTIAL PRESENCE TEST
You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States (US) on at least:
- 31 days during the current year, and
- 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
- All the days you were present in the current year, and
- 1/3 of the days you were present in the first year before the current year, and
- 1/6 of the days you were present in the second year before the current year.
If you meet the substantial presence test, you will be required to file a US tax return.
How Do US Taxes Work For Expats?
The US taxes all its citizens on worldwide income - even if you are living overseas and paying tax in that country.
But... you don't pay tax twice! You can credit foreign taxes against the US tax and you can exclude foreign salaries and freelance income to a threshold each year.
Unfortunately, not filing US tax returns is a criminal offence. It's easy to catch up with your US tax returns or file them each each year.
ALREADY PAID TAXES IN YOUR HOME COUNTRY
You can offset any taxes paid in your home country against US taxes due on the same income.
The US allows you to claim a credit for taxes paid overseas.
You can also exclude employment and self-employed income up to a level each year.
A lot of expats overseas do not owe any US taxes once all the exemptions, credits and tax exclusions are claimed. The IRS does still require that you file a US tax return each year.
RENOUNCING YOUR US CITIZENSHIP
LONDON'S US TAX ACCOUNTANT
MAKE SURE THERE ARE NO US EXIT TAXES
We'll need to run through the 3 US tax tests below:
- Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is less than a specified amount that is adjusted for inflation ($151,000 for 2012, $155,000 for 2013, $157,000 for 2014, and $160,000 for 2015)
- Your net worth is less than $2 million on the date of your expatriation or termination of residency
- You have filed US tax returns for the last 5 years
If you don't meet any of these tests then you may be liable for US exit taxes
CATCHING UP WITH US TAXES
THE STREAMLINED FILING PROCEDURE
If you haven't been filing US tax returns and you are a US citizen, or you have a Green Card, you can use the amnesty that the IRS has in place - the Streamlined Filing Procedure.
Under the Streamlined Filing Procedure you will need to:
- file the last 3 US tax returns that are overdue
- the last 6 foreign bank account reporting forms that are overdue
- a disclosure that the filing was non-wilful (not on purpose)
Under the Streamlined Filing Procedure there are no late filing penalties for the overdue returns.
There are also no failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
HOW CAN WE HELP?
STATE TAX RETURN
As IRS Enrolled Agents, with knowledge of your situation, we can advise you if you need to file a state return. Generally speaking:
- If you last resided in or maintain residency in California, New Mexico, North Carolina or Virginia, you will likely need to file a state tax return.
- If you last resided in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, then you probably will not need to file a state tax return.
- For most other states, it will depend on your personal circumstances, how long you have been abroad, what ties you have to the specific state, etc.
CATCH UP ON US TAX RETURNS
If you haven't filed, or didn't know you needed to file, your US tax returns, there is a process to get everything up to date - the streamlined filing procedure.
Using the streamlined filing procedure, you need to file three years of federal tax returns with all the appropriate forms and schedules and you also need to file six years of foreign bank account reports.
Main benefits of the streamlined filing procedure:
- all penalties will be waived under the streamlined procedures
- you only need to file the last 3 federal personal tax returns
- even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy-related penalties with respect to amounts reported on those returns
FOREIGN BANK ACCOUNT REPORTING
The FBAR is only required if you have a financial interest in one or more overseas financial accounts and the total value of all of the financial accounts combined was $10,000 or more during any point during the tax year. The FBAR (FinCEN Form 114) must be filed electronically with the US Treasury Department (not the IRS) by June 30th (there are no extensions).
BUSINESS TAX RETURN
A business return is needed for any business that is considered a separate entity. Examples of this include (but are not limited to): Forms 1065, 1120 and 1120S
Included In our Business Package:
- All relevant Forms, Schedules and K-1′s