Living Abroad Or Lived Abroad? - You Still Need to File an IRS Tax Return - Here"s When and How
If you are a US citizen but you are working outside the country for a significant period of time you do not get to evade the requirement of filing a US tax return in most cases.
If you made more than $9,000 dollars abroad or overseas then the bad news you need to file a return.
The good news is we detail how to do it as well as forms you need to complete if you are working abroad.
Let's start with what forms are recommended that you complete, irregardless of filing.
One important form that needs to be completed if you have over ten thousand in a foreign bank or financial institution is form TD F90-22.
1 This is not related to a 1040 or individual tax return so do not send it in or to the same address with your income tax return.
This is a form that is required solely if you are a US citizen and your money is being held in a foreign financial institution.
If you are trying to complete tax returns you forgot to fill out (from previous years or recent) then you will start with a Schedule C (1040).
If you were given gifts from a foreign national or trust, then you will need to complete Form 3520 or 3520A (see our site details below for form links).
Remember, when reporting your income the IRS wants the filing in US dollars, so you will need to use current exchange rates.
Realize to avoid any double taxation (taxes from the country or countries you resided in as well as the US) there are certain exclusions you can apply for.
First, there is a Foreign Earned Income Exclusion.
The Foreign Earned Income Exclusion allows you to deduct up to $87,600 in the year 2008 and $91,400 for 2009.
This means if you made $87,500 abroad, the US cannot claim any taxes you owe for 2008 although you still need to file.
For this exclusion you will need to fill out Form 2555 (Foreign Earned Credit).
You have probably heard of form Form 2555-EZ and trying to understand which on you need.
If you do not plan on requesting the Foreign Housing Exclusion (discussed below) then Form 2555-EZ is all you need.
In addition to the Foreign Earned Income Exclusion, there is another exclusion which can cover you for another 10-15k depending on your living expenses abroad.
In other words, if you made say $100k abroad (converted to US dollars) you still may not owe the US any taxes if your housing exclusion and Foreign Earned Income Exclusion combined covers your total income.
To calculate your housing exclusion, take 16% (.
16) and multiply it by the Foreign Earned Exclusion ($87,500) and you will get around $14k.
Remember you need to be abroad at least a year (Bona Fide Residence Test) or out of the US 330 out of 365 days last year (based on 12 consecutive month periods).
Overall, it is recommended that you file a tax return if you make over $9k and take advantage of exclusions so you do not become a victim of double taxation.
Moreover, it is best to act quickly, be proactive, and work a tax professional for guidance.
If you made more than $9,000 dollars abroad or overseas then the bad news you need to file a return.
The good news is we detail how to do it as well as forms you need to complete if you are working abroad.
Let's start with what forms are recommended that you complete, irregardless of filing.
One important form that needs to be completed if you have over ten thousand in a foreign bank or financial institution is form TD F90-22.
1 This is not related to a 1040 or individual tax return so do not send it in or to the same address with your income tax return.
This is a form that is required solely if you are a US citizen and your money is being held in a foreign financial institution.
If you are trying to complete tax returns you forgot to fill out (from previous years or recent) then you will start with a Schedule C (1040).
If you were given gifts from a foreign national or trust, then you will need to complete Form 3520 or 3520A (see our site details below for form links).
Remember, when reporting your income the IRS wants the filing in US dollars, so you will need to use current exchange rates.
Realize to avoid any double taxation (taxes from the country or countries you resided in as well as the US) there are certain exclusions you can apply for.
First, there is a Foreign Earned Income Exclusion.
The Foreign Earned Income Exclusion allows you to deduct up to $87,600 in the year 2008 and $91,400 for 2009.
This means if you made $87,500 abroad, the US cannot claim any taxes you owe for 2008 although you still need to file.
For this exclusion you will need to fill out Form 2555 (Foreign Earned Credit).
You have probably heard of form Form 2555-EZ and trying to understand which on you need.
If you do not plan on requesting the Foreign Housing Exclusion (discussed below) then Form 2555-EZ is all you need.
In addition to the Foreign Earned Income Exclusion, there is another exclusion which can cover you for another 10-15k depending on your living expenses abroad.
In other words, if you made say $100k abroad (converted to US dollars) you still may not owe the US any taxes if your housing exclusion and Foreign Earned Income Exclusion combined covers your total income.
To calculate your housing exclusion, take 16% (.
16) and multiply it by the Foreign Earned Exclusion ($87,500) and you will get around $14k.
Remember you need to be abroad at least a year (Bona Fide Residence Test) or out of the US 330 out of 365 days last year (based on 12 consecutive month periods).
Overall, it is recommended that you file a tax return if you make over $9k and take advantage of exclusions so you do not become a victim of double taxation.
Moreover, it is best to act quickly, be proactive, and work a tax professional for guidance.