Expats living or working in the United States receiving foreign income must declare their offshore earnings to the Internal Revenue Service (IRS).
Although the rules are straightforward and similar for US expats living overseas, the IRS has published seven tips to help filing a tax return run smoothly:
- Declare worldwide income
Tax laws in the United States require all citizens and resident expats to report their worldwide income to the IRS – including interest and chargeable gains on savings and investments in other countries whether they are held personally or controlled through a trust or company
- File the right forms
Make sure the right tax return forms are filed – the IRS suggests checking for filing the following forms which are often overlooked:
Schedule B Interest and Ordinary Dividends
Form 8938 Statement of Specified Foreign Financial Assets
FinCEN Form 114
Report of Foreign Bank and Financial Accounts
- Don’t miss deadlines
Taxpayers living overseas who believe they might miss the April 15 filing deadline should consider applying for an automatic extension. The extension gives up to an extra two months for filing returns – but you will need to attach a note explaining why you cannot meet the deadline
- Check overseas income
Check the Foreign Earned Income Exclusion. US residents living or working overseas are often eligible for foreign earned income exclusion which means not paying tax on the first $97,600 of any salary and other foreign earned income in 2013.
- Watch how much you pay
Taxpayers should always check if they qualify for tax credits or deductions to reduce the amount of tax they have to pay. Despite a fearsome reputation, the IRS wants people to pay the right amount of tax, not too much or too little.
- Go online with the IRS
Take advantage of the online IRS Free File portal. Different software is available depending on whether a taxpayer earns up to $58,000 or more. Some software also works for US expats with overseas addresses.
- Get help
Ask for help with filing tax returns – not only does the IRS have comprehensive online help and call centres, but also has offices in London, Frankfurt, Paris and Beijing, where tax advice and help filling in forms is available.
- Find out more information
Find out more about help for expat and non-resident taxpayers –
Publication 514 – Foreign Tax Credit for Individuals