Expatriate Tax Return: What Is It and Why You May Need to File It?

If you are a U.S. citizen, but also an expatriate, filing an expatriate tax return should be your top-most priority to save yourself against hefty fines, penalties, interest and even imprisonment. Filing expatriate tax return is essential, but how you are going to file it will make all the difference. Don’t be appalled; for now, you just need to know what an expatriate tax is and why do you need to file it.

Not many American expats know that even if they are living abroad, they still have to file tax returns in the U.S., even when there is no tax liability. The authorities are really concerned about your income and they want to ensure that no earned income is left untaxed.

If you are new to expatriate tax filing, you might feel like stepping into the labyrinth of a whole lot of financial jargon, but don’t worry, we have made it as simple for you as we could.

The purpose is to get you the maximum tax advantage while filing an expatriate tax. At Protax Consulting Services Inc., we have the expertise and training required you to comfortably tread you through the whole process, while maximizing the expatriate tax savings.

Foreign Earned Income Exclusion

This is one of the biggest expatriate tax advantages that you could make use of. Under the Foreign Earned Income Exclusion, you can file an expatriate tax return and claim an exclusion on your foreign income and housing, but with a few preconditions.

The 2017 Foreign Earned Income Exclusion has been increased to $102,100 (101,300 for 2016). This means that you and your spouse could earn up to $204,200 without paying any Federal income tax. Also, all your passive income like dividends, rental income and other earnings that aren’t derived aren’t taxable earnings. And if your housing expenses in the foreign country are more than what they may have been in the U.S., the difference is also deducted out of your taxable income.

 Foreign Tax Credit

If you are paying your foreign income taxes on your foreign income to a foreign country, you can get a foreign tax credit that will reduce your U.S. taxable income. Foreign income taxes can largely reduce your U.S. income taxes, so a filing a foreign tax credit is pertinent.

Other Tax Savings

Filing your tax return the right way could save you against different penalties and fines. It could require you to report your foreign assets accurately, and filing other requisites like Form 5471, Form 1116, and Form 1040NR.

When Do You Have to File for an Expatriate Tax?

All U.S. citizens residing overseas are required to file their tax returns by April 15. If you are in the military, but on duty outside the U.S., you are provided an automatic extension of two months, so you can file your tax return by June 15.