US Expat tax issues and planning

Expatriates, more commonly known as expats, are US citizens residing overseas. There are over 8 million US citizens living abroad. Most have been presented with opportunities in other countries and aren’t trying to “escape” the. How the US tax code treats these citizens is where everything dissolves into chaos.

What are the tax consequences of being a US expat?

While the United States had tax treaties with come countries to avoid “double taxation”, there are still quite a few tax traps. Thanks to a law called FATCA, any money earned or invested by US taxpayers outside of the US is subject to scrutiny. Some specific issues include…

When I started living and working overseas, I didn’t think I had to report my income to the US. Can you help?

Yes. This is a very common issue. The United States is one of the only countries to tax based on both residence and citizenship. Other countries tax worldwide income of residents, but not citizens living elsewhere. Many taxpayers don’t report their income just because they aren’t aware of this.

I heard that I had to report my foreign accounts over $10,000, but I thought that was for each account, not a total. Can you help?

Yes. People assume that since they have multiple accounts that are all under $10,000, they didn’t have to report each individual account. Bear in mind that the $10,000 minimum is the total combined value of all accounts. Let’s say you have $5,000 in an account in Hong Kong, $4,000 in an account in the UK, and $2,000 in an account in India – since the total combined amount of those accounts is over $10,000, you would have to report each one.

But wait! The law says I have to report my “foreign” accounts. I live in Australia, and all of my accounts are in Australia. How is that “foreign?”

When the IRS refers to “foreign” accounts, basically they mean “non-US” accounts. While an account may not seem foreign to you, it may be foreign to the US. Another very confusing issue that many face involves foreign retirement plans – in some countries they are taxable, in others they are not.

Is it true that my passport can be taken away if I have tax debt?

Unfortunately, yes. We know just how important a passport is to US taxpayers that are living and working overseas. For all of the details about this new law, click here.

If I have a tax debt, how long does the IRS have to collect on it?

Generally speaking, the IRS has to collect on a tax debt within 10 years from the time it was assessed or lose out on the ability to collect on that liability forever. But…it is different with expats. The time may be tolled indefinitely when a taxpayer is outside of the country for six months or more. However, we have seens cases where the IRS has failed to code a case properly, and allowed the 10 year clock to run where they shouldn’t have.

I had someone else prepare my tax returns. They either weren’t aware of the requirement to disclose foreign accounts or made an error in reporting!

This is a very common issue, but what many people don’t realize is that once you sign  that return, you are ultimately responsible for what is on it. Not the tax preparer. If you’re living and working overseas and hire someone to file your taxes, they may not be aware of the complicated US tax laws. If you think you may have an issue, contact us. We are very familiar with all of the issues that expats face.

I’m planning on moving overseas to live and work. Can you help me prepare my finances?

We’ve spent the last 10 years helping expats fix issues. Thanks to our experience, we know how to set you up for success if you’re making the move overseas while keeping your US citizenship.

Contact us to set up a free, confidential consultation. Call 888-727-8796 or email info@irsmedic.com.

We invite you to review success stories and case studies of clients of ours.