Millions of Americans work overseas, and these folks may be surprised (or merely woebegone) to learn that no matter where their income is generated, they still need to file U.S. tax returns.
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The only way to be exempt from filing a U.S. tax return is to abandon green card holder status by filing Form I-407 with the U.S. Citizen & Immigration Service or renounce U.S. citizenship under certain circumstances described in the expatriation tax provisions.
Filing a U.S. tax return from overseas isn’t drastically unlike filing a tax return in the U.S. The same deadline (April 18 this year) applies, as do the same general rules.
“For U.S. citizens or resident aliens, the rules for filing income, estate and gift tax returns, as well as paying estimated tax, are generally the same, regardless if you are in the United States or abroad,” said Ohan Kayikchyan PhD, CFP, founder of Ohan The Money Doctor.
But there are some tricks and tips you should know when filing taxes from abroad.
You Have an Automatic Two-Month Extension To File
Those filing from overseas are granted automatic two-month extensions to file — without requesting an extension. However, you still must pay what is owed by tax day.
“For a calendar year return, the automatic two-month extension is to June 15,” said Jeff Jackson, a certified public accountant and JustAnswer tax expert. “For the calendar year 2022, you must pay any tax due by April 18, 2023, or interest will be charged.”
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You Might Qualify for the Foreign Earned Income Exclusion
You might qualify for the Foreign Earned Income Exclusion, which allows taxpayers overseas to exclude their foreign earnings from income up to an amount adjusted annually for inflation, noted tax specialist Kasia Strzelczyk from 1040 Abroad, a company that specializes in international taxation.
The amount you can deduct for this exclusion for the tax year 2022 is $112,000.
Take Advantage of Any Tax Treaties
Some countries have tax treaties with the U.S. that can afford you certain benefits come tax filing time.
“If [you] live in a foreign country that has a tax treaty with the U.S., take advantage of the benefits offered by the treaty,” Strzelczyk said. “The same goes for Social Security taxes. If [you] live in a country that has a totalization agreement with the U.S., utilize provisions of the agreement and avoid double taxation on Social Security taxes.”
You May Exclude Some Housing Costs
U.S. taxpayers filing from overseas also might be able to exclude a portion of their foreign housing costs using the Foreign Housing Exclusion.
“If you don’t qualify for the exclusion,” Strzelczyk said, “you may be eligible for the Foreign Housing Credit instead.”
Don’t Forget Additional Reporting Obligations for Expats
Americans who go overseas also might be required to disclose their foreign investments, business interests and bank accounts.
“The most typical supplementary reporting requirement for expats is the submission of FBARs (Foreign Bank Account Reports),” said Levon Galstyan, a CPA with Oak View Law Group. “Any American with more than $10,000 in total in overseas financial accounts must have it at any point in the year. In addition to any joint accounts and business accounts they have signatory control over, foreign financial accounts include bank, investment and individual pension accounts.
“It is also necessary to record any foreign-registered enterprises that an expat owns or has a major stake in. It is important to note that foreign-registered corporations’ reporting requirements differ from those registered in the U.S.”
Don’t Neglect State Taxes
State laws differ and Americans always should check to see what their state requires when it comes to income taxes.
Galstyan explained: “When an expat maintains the property, dependents, financial assets or other significant ties in a state, if they continue to spend substantial amounts of time there throughout the year, or if they intend to move back and settle there in the future, these circumstances necessitate filing state taxes from outside the country.”
Understand the Tax Laws of the Country Where You’re Working
You’re not just working for the U.S., presumably, but also for whichever country you’re based in, and their rules also apply; thus, you’ll need to understand their unique rules and laws, too.
“Some countries have higher tax rates than the U.S., while others may have lower rates or different deductions and credits,” Galstyan said. “You may also be required to file a tax return in the country where you’re working.”
Keep Accurate Records
You should always keep accurate records of your income and expenses, but this is especially crucial when working abroad.
“You’ll need this information when filing your U.S. tax return, and it can also help you take advantage of deductions and credits,” Galstyan said. “Working from abroad can be a fantastic experience, but it’s essential to understand your tax obligations to avoid problems down the road. By following these tax tips, you can ensure that you comply with the law, take advantage of available deductions and credits, and keep more of your money in your pocket.”
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This article originally appeared on GOBankingRates.com: Working From Abroad? 8 Tax Tricks To Know