Even if you leave the U.S your tax responsibilities follow.
Working or living somewhere other than the U.S? If so, it doesn’t mean you can escape U.S taxes. But, there’s good news. Filing your taxes in another country is actually pretty straightforward.
We’ve taken the time to outline some of the most important bookkeeping tips for international taxes below.
Keep on Top of Deadlines and Requirements
When living and working abroad, you only need to file a return if you make it over the minimum threshold. The threshold is $12,000 for a single household and $24,000 for married persons who file jointly.
You may also have a different filing deadline compared to others. If you’re owed a refund, you might be eligible for an extension until June 15. But, keep in mind, to qualify for this extension you have to be certain you’re owed a refund.
Either way, it’s best to speak with a financial professional like us at A.P Accounting & Tax Services. We are experts when it comes to dealing with taxes, international tax laws, and filing. Working with us makes sure your taxes are filed correctly and on the right date.
Foreign Earned Income Exclusion
Be aware that you could be eligible for the Foreign Earned Income Exclusion if you live and work in another country.
This means that income (up to $101,300) is excluded from taxation. This is true even if it’s a U.S company that’s paying you and is being deposited into a U.S bank account.
All you need to qualify for this tax break is to be physically working outside of the U.S during the specific period.
Foreign Tax Credits
Depending on your situation, you may be better off using the Foreign Tax Credit. This credit gives American taxpayers a $1 U.S. tax credit for every dollar of tax paid abroad.
This could be a better option for those living and working in a country with higher income tax rates. However, you will need to keep on top of all your receipts. Meaning, you will need to have organized records and proof of all your purchases while away.
FATCA and FBAR
If you have a minimum of $10,000 in a foreign bank or investment account you are required to file an FBAR (Report of Foreign Bank and Financial Accounts).
Further, if you have assets abroad that are worth over $200,000 per person you are required by FATCA (the Foreign Account Tax Compliant Act) to report it on Form 8938 of your federal return. It’s important to note that the assets do not include property. We also understand how tricky it can be to navigate these laws which are why working with a tax professional is essential.
State Returns and Tax
Depending on the state you live in, you may be required to file state taxes. Places like California and Virginia require you to file, while Washington and Texas do not. Even if you haven’t lived in the area for years, the state might still consider you a resident. Oftentimes, if you still have a valid driver’s license, own, or rent property in the state, the government still considers you a resident who needs to pay up.
Know Who Pays
If you are employed by a US company, taxes will be deducted automatically from your paycheck. There are also Tax treaties and Totalization Agreements with certain regions that help prevent double taxation on things like income and Social Security. However, these vary based on where you are in the work. Meaning you’ll need to know what tax protections are available to you.
Ultimately, it’s important to keep on top of taxation laws while working abroad. Otherwise, being ignorant of your responsibilities could end up costing you more.
Whether you’d be interested in learning more, or knowing what services would benefit you, give us a call at 407-328-5001.
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