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Americans Living Abroad: Do You File Your Taxes Every Year?

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Americans Living Abroad: Do You File Your Taxes Every Year?

Postby Everdred » Mon Oct 28, 2013 2:45 pm

I have a a few questions for all of you Americans living abroad out there. First, do you any of you file your annual taxes concerning the income you make while living overseas? I've been in living in Asia over four years now, and I've never filed my taxes during this four year period. I'm aware that Americans earning under $97,600 USD annually don't get taxed on their overseas income, however, we're still theoretically supposed to file each year. I can assure you that my annual income is well below that mark (I'm an English teacher after all), yet I've still never filed. And in these four years, I've only met one other American who claims he actually files annually. Many of the other Americans I've asked didn't even know what the hell I was talking about.

Second, if I want to file my taxes from right here in Bangkok, what's the simplest way to go about doing that? I'd prefer not getting any of my family or friends back in the United States involved. If absolutely necessary, I could ask one of them for help, but obviously that isn't ideal. Is there any way I could it online with minimal costs and headaches involved?

Third, what kind of consequences am I facing for never reporting my annual overseas income? Would not filing all these years come back to bite me in the ass if I were to return to live/work in the United States in the future? Have any of you had any personal experiences or know anyone who's gotten into trouble for not filing every year? Surely the consequences wouldn't be that dire...right?

And finally, I've also heard that Americans are supposed to report any bank accounts they open overseas to the American government. Anyone know anything about that? Surely the American government couldn't enforce that. Check out the links below to know more about what I'm talking about:

About.com: Report of Foreign Bank and Financial Accounts
Forbes: Will IRS Find Your Small Bank Account?

Not sure if it matters or not, but I likely won't live in the United States again for a VERY long time (25+ years). I prefer to do my tax filing the legal and "right" way, but not if that process is a major pain in the ass. Any help concerning this topic would be greatly appreciated. Thanks.
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Re: Americans Living Abroad: Do You File Your Taxes Every Ye

Postby HouseMD » Mon Oct 28, 2013 3:06 pm

Your foreign accounts are reported to the USA by your bank. Basically, any foreign bank that wishes to trade American stocks, bonds, and equities must report all US citizens that utilize their services. If they refuse to report, they lose access to all US markets. Some foreign banks won't even touch US customers for this reason, as the reporting requirements are quite arduous and losing access to US markets due to an error would simply be too devastating.

Since your income is so low, you will likely have no penalties upon your return to the United States. I would encourage you to file anyway for one major reason though- if the IRS decides to audit you, you might be rendered unable to renew your passport until you provide income statements for all of the years in which you did not file. It might never happen, but in my experience, one should always avoid a situation that might result in not having a passport while staying overseas.
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Re: Americans Living Abroad: Do You File Your Taxes Every Ye

Postby Rock » Mon Oct 28, 2013 3:40 pm

Everdred wrote:I have a a few questions for all of you Americans living abroad out there. First, do you any of you file your annual taxes concerning the income you make while living overseas? I've been in living in Asia over four years now, and I've never filed my taxes during this four year period. I'm aware that Americans earning under $97,600 USD annually don't get taxed on their overseas income, however, we're still theoretically supposed to file each year. I can assure you that my annual income is well below that mark (I'm an English teacher after all), yet I've still never filed. And in these four years, I've only met one other American who claims he actually files annually. Many of the other Americans I've asked didn't even know what the hell I was talking about.

Second, if I want to file my taxes from right here in Bangkok, what's the simplest way to go about doing that? I'd prefer not getting any of my family or friends back in the United States involved. If absolutely necessary, I could ask one of them for help, but obviously that isn't ideal. Is there any way I could it online with minimal costs and headaches involved?

Third, what kind of consequences am I facing for never reporting my annual overseas income? Would not filing all these years come back to bite me in the a** if I were to return to live/work in the United States in the future? Have any of you had any personal experiences or know anyone who's gotten into trouble for not filing every year? Surely the consequences wouldn't be that dire...right?

And finally, I've also heard that Americans are supposed to report any bank accounts they open overseas to the American government. Anyone know anything about that? Surely the American government couldn't enforce that. Check out the links below to know more about what I'm talking about:

About.com: Report of Foreign Bank and Financial Accounts
Forbes: Will IRS Find Your Small Bank Account?

Not sure if it matters or not, but I likely won't live in the United States again for a VERY long time (25+ years). I prefer to do my tax filing the legal and "right" way, but not if that process is a major pain in the a**. Any help concerning this topic would be greatly appreciated. Thanks.


1. Didn't I talk to you about this subject when we met in Bangkok? If I'm mistaken, count me as another American living overseas who faithfully files US income tax returns to IRS and FBARS to treasury every year as an expat US citizen.

2. This point is debatable. Some others might recommend you stay off grid as much as possible. But I recommend file income tax returns every year even though you probably don't owe tax. The good news is that you can do deliquent returns for the previous years and as long as no tax should have been payed on any of those years, you will not be penalized in anyway. In fact, if you pay taxes in Thailand, you might even accumulate foreign earned income tax credit which can be useful at some point (to offset some of your investment income taxes).

3. If you have any kind of investment incomes from overseas or USA (interest, dividends, or capital gains), those are not included in the earned income exclusion ($97,600) so even if you earn a modest amount from those activities (say $20,000), you are probably going to owe some tax.

4. The FBAR forms (TDF90221 I think as per your link above) need to be filed only if you have ownership or signature authority of overseas financial (brokerage, bank, forex, funds, etc.) accounts whose aggregate maximum balance for previous year was US$10,000 or more. Those need to arrive at Treasury Department in Detroit by end of June the following year. Make sure you do those if your foreign accounts surpass the threshold (added up). Tens of thousands of Americans both at home and overseas have already been burned with huge penalties (some even went to prison) for not doing those and getting caught. Banks and financial institutions around the world are playing ball with US Justice Department and handing over client names, even complying with John Doe requests. If you haven't done them in the past, DON'T do delinquent FBARS covering previous years (different advice than for income taxes) because they have a guy in Treasury now who scrutinizes those and will flag you for likely audit. Instead, just quietly start doing them in 2014 for year 2013 and continue doing so going forward. 99.9% chance you will never get noticed. But if you keep failing to file them, within 2 or 3 years, one or more of your financial institutions will likely send your info to Treasury as new standard practice under FATCA and they will catch you. Comply by getting back into the system quietly - do at least 3 and maybe 6 years of delinquent tax returns (at least 2010, 2011, 2012) and also begin doing FBARS before June 30, 2014 (to cover 2013) but don't do FBARS for previous years.

5. You can use Turbo Tax and do them yourself. If you need help, try to find a Thai guy who does US expat taxes and see if he can cut you a deal for the delinquent returns. Do the FBARS yourself.
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Postby Rock » Mon Oct 28, 2013 4:20 pm

As for the mechanics, buy a version of Turbo Tax which fits your situation, fill in the blanks, and you can probably e-file. You can even do e-payment. But if that doesn't work for some reason, go to your bank, cut a check, and send it to the appropriate IRS office.

FBARs need to be printed out, singed and dated, and snail mailed to Detroit office. All the info you need is online and Turbo Tax will guide you through it.

For the delinquent returns, you might need some professional help (maybe a Thai with US CPA who helps American expats file their taxes). You would also go to one of the bulge bracket international CPA firms but they will probably charge you in the neighborhood of 20,000-50,000 Baht for each delinquent year they prepare a return for!
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Postby Devil Dog » Mon Oct 28, 2013 6:52 pm

File now. You won't owe anything and you remove possible future hassle.
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Postby Jester » Wed Oct 30, 2013 7:45 am

Agree with above posters.

Nonfiling WILL become an issue at the time of:
Passport renewal
or
Renunciation of citizenship

also
Nonfiling COULD become an issue:
If you return to the same state you lived in, and THEY want to see back taxes.


If you are not actively pursuing an alternative citizenship (quite doubtful in Thailand) then you DO need to keep clean with the US.
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Postby tre » Wed Oct 30, 2013 7:56 am

Good topic (was about to ask this question myself) and great answers.

The IRS is an absolute monster that you should NEVER forget about. They don't care about anything other than squeezing you dry and are quite ruthless when they THINK you are holding out on them....
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Postby Robert77 » Wed Oct 30, 2013 10:48 am

The question is... HOW DO YOU FILE TAXES ABROAD... many american males read this and would like some help (I know an american woman who lives abroad and does not file taxes) mainly because her non-american husband supports her economically while she stays at home.

turbo tax is there and some of you mention FBAR, but it would be great if this thread is used as a little guide

DATE FOR FILLING TAXES IF YOU LIVE ABROAD : JUNE 15
FORMS TO FILL OUT: REGULAR FORM, AND FBAR
you can use turbotax

if you do a google search you find difficult lingo, and too much reading.... not enough to the point info.

any more info you'd wanna share gentlemen?
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Postby ladislav » Wed Oct 30, 2013 8:00 pm

I always did.

Google " taxes for expats". There are several companies that do it. I am sure they can file back returns.

There are also many companies whom you can find online that advertise back tax filing.

http://www.taxesforexpats.com/

It's always better to use an accountant and pay several hundred bucks as the IRS feels more confident when it's filed that way.

http://www.taxesforexpats.com/services/back-taxes.html
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Postby Jester » Wed Oct 30, 2013 10:34 pm

Robert77 wrote:
The question is... HOW DO YOU FILE TAXES ABROAD... many american males read this and would like some help (I know an american woman who lives abroad and does not file taxes) mainly because her non-american husband supports her economically while she stays at home.

turbo tax is there and some of you mention FBAR, but it would be great if this thread is used as a little guide

DATE FOR FILLING TAXES IF YOU LIVE ABROAD : JUNE 15
FORMS TO FILL OUT: REGULAR FORM, AND FBAR
you can use turbotax

if you do a google search you find difficult lingo, and too much reading.... not enough to the point info.

any more info you'd wanna share gentlemen?



BANK ACCOUNTS ABROAD

FBAR is the most critical, if you have $10k usd in banks/brokerages abroad at any moment during the year you have to file. They will want bank info, account info, and the highest balance you've had for the year, I forget if there's anything else. You can download a PDF and take a look if you want.

I read that from now on you will have to file it electronically, so the paper/PDF is just a draft.

No delays or postponements, whopping penalties. So I plan to file in January, around New Year's Day. (Or right after getting December bank statement(s) if I am getting mail from any foreign accounts).

Less than $10k in the bank overseas - and you can forget about it, just file regular taxes.

If you have 50,000, even in companies or family-controlled entities, plus your personal, then there is ANOTHER, redundant form, related to FATCA. I forget the name of the form. At this level you better have an expat American tax preparer. there are some in the US, especially New york, and some in places like Yucatan and Belize where there are lots of expats. Easy to google.


FEDERAL INCOME TAX

Of course when you file income tax, you know to add a FEI form to exclude 97,500 usd of your "Foreign Earned Income", including online income, if you are abroad 330 days of the year, or if you pay are permanently domiciled (and filing any local taxes) where you live.

Works for money you earn through work, not investment income.

Btw I think you have to use the 1040, not a "short form" if you're takeing the FEI exclusion.


SELF EMPLOYED
You still have to pay FICA tax on all your earned income, US and foreign, if you're self-employed - this is the one on Schedule SE. Around 14% (after your business deductions on Schedule C).

UNLESS you're living in a "tax treaty" country, and paying THEM social security tax, which is generally worse.

The countries with LOWER social security tax than us would generally NOT have a "tax treaty", so you would have to pay BOTH. Some countries, like Mexico, dont care what you earn online from the US. But anywhere it makes sense to have US income deposited into US account, so tax collectors dont see regular income coming into your local account.

I've studied it, and the best deal is to just go ahead and pay the SE to Uncle Sam until you renounce citizenship. (Unless you're working locally, off the books, for cash. :wink: And that would be a no-no.)


STATE INCOME TAX
Some states want to collect when you're overseas unless you can prove you have severed all ties with the state and have no intention to return. They don't chase you overseas, but they would definitely seize your local bank account, and garnish etc if you return.

Best protection is to:
(1) Change US address to a state that doesn't do that, and notify the state. If possible change voter registration, drivers license, bank account, etc - whatever you can.
(2) Whatever you do, do NOT rent a storage placeinder your name in, say, California. They will see that as proof that you always intended to return, and therefore should have been paying taxes all along.
(2) Don't go immediately back to the same state when you return, if its one of those states.

http://www.taxesforexpats.com/articles/ ... eturn.html
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Postby Everdred » Sun Nov 03, 2013 4:21 am

Thanks for all the tips so far. Since my original post, I've sent out a few emails and have done a lot of research. Some of the things written below may be more obvious to the older crowd, but bear in mind that I'm a guy in my twenties who has very little experience filing taxes. Way back in the day, I always had a family member do it for me.

Paying someone to do your taxes for you is incredibly expensive to someone earning an English teacher's salary. First, I joined Bright!Tax, which is an online company that specializes in filing taxes for Americans living abroad. They quoted me $349 USD to file the first tax year and $289 USD for every subsequent year. I felt that was way too overpriced for someone like me, considering how meager my income is.

Next, I contacted J.P. Rooney and Associates, a company in Bangkok that can file taxes for American expats. They were referenced on the IRS' website, so I figured they must be dependable to get the job done. They quoted me $475 USD per tax year filed. Obviously way too much for me.

Being incredibly frustrated with these high prices, I did some intense Googling. I'm surprised how little information there is on the internet regarding this issue. Nonetheless, I discovered that for expats who make a simple income overseas (such as English teachers), filling out your tax forms is not all that complicated.

Concerning taxes, all Americans living overseas are required to fill out two forms, IRS form 1040 and IRS form 2555. The 1040 is the form ALL Americans have to fill out, not just Americans living overseas. This is a very standard tax form. The 2555 is the form specifically required from Americans earning income overseas. Both of these forms are a bit complicated. I doubt your average Joe could fill out either of these forms without some assistance.

The good news, for American expats with a simple income like me, is that we're allowed to fill out IRS form 2555-EZ. What's the difference between the 2555 and the 2555-EZ? Well, the 2555-EZ is a much simpler version of the 2555. Basically, if you're an expat who only earns income from your overseas job, then you're allowed to fill out the 2555-EZ, rather than the 2555. This is good because the 2555 is incredibly difficult to follow and understand. The 2555-EZ is way more simple.

However, if you're an American expats who earns income from several different sources, then you're not allowed to fill out the 2555-EZ. You're required to fill out the 2555. Let's say you're an American expat who:

1. Works full time as an English teacher in Thailand (or any other foreign country).
2. Earns lots of interest from a savings account in an American or foreign bank.
3. Rents out an apartment in America or any other country.
4. Works a few extra hours a week doing online translation work.

In this case, you're earning income from too many different sources to simply use the 2555-EZ form. You would definitely have to fill out the 2555 instead.

Now let's say you're an American expat like me who:

1. ONLY works full time as an English teacher in Thailand (and maybe occasionally makes side income through tutoring).

Good news. You're allowed to fill out the dumbed-down 2555-EZ form. Bear in mind that you still have to fill out the 1040 form. EVERY American must fill out the 1040 form. Only Americans earning income overseas must fill out the 2555 or the 2555-EZ.

Luckily, the 2555-EZ is not that difficult to fill out. I did it completely on my own and feel semi-confident that I did everything correctly. There is a supplementary form called the "Instructions for Form 2555-EZ" that can help guide you as you fill out the form. Both the 2555-EZ and the supplementary instructions form can be downloaded from the IRS' official website. (There is also a supplementary instructions form to go along with both the 2555 and the 1040).

One thing to note is that the IRS also has a form called the 1040-EZ. This is a dumbed-down version of the 1040. Unfortunately, for whatever reason, American expats are NOT allowed to fill out the 1040-EZ. We still have to file out the much more complicated 1040.

I urge all English teachers out there earning a simple outcome to file their taxes themselves. Do not pay the insane prices that the tax filing companies are asking for. I've got all of my previous years' forms filled out, so now I've just got to get them all mailed off to the appropriate American address so the IRS can file them. Hopefully there'll be no problems. [fingers crossed]
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Postby Jester » Sun Nov 03, 2013 4:48 am

Well done Everdred! EXCELLENT research and conclusions.

And I don't know where you turned up the 2555-EZ, but well done.

I have NEVER seen it mentioned ANYWHERE on the internet.
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Postby ladislav » Sun Nov 03, 2013 6:08 am

Oh, you are just an ESL teacher? Download 1040 and 2555, fill them out and ask your accountant at your school to give you some kind of statement of earnings for that year. Then attach the statement and send the whole package to the address indicated-it is somewhere on those forms. Or you can just Google it.

Some schools did not issue me any income statement. I just attached my pay stubs/bank statements as proof. On other occasions, I simply declared it with no proof and attached a note saying that I am abroad and my school does not issue anything like this.

Been doing this for over 20 years. I am not keen on Turbo Tax since it is not very user friendly when it comes to overseas filers.

Also, don't forget your state taxes. Find out if you are now a non resident or what.

Send it by registered mail, so you have proof that it was sent, and make copies of the filled-out forms.
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Postby Contrarian Expatriate » Sun Nov 03, 2013 12:20 pm

Now is the time to get an accountant an file all your back tax returns. You might have to pay a penalty, but that is better than having the IRS place liens on your accounts and arrest you as a tax scofflaw.

File your taxes each year and don't bank on renouncing your citizenship without first doing so. You will not be able to do so without paying back taxes first.

Tax cheating is a fool's game; don't play it.
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Postby Winston » Tue Apr 22, 2014 2:05 am

I did some research into this.

If you are single and not married, you are required to file tax returns if you make over $10,000 a year in income.

If you are self-employed, you are required to file if you make over $400.

See here:
https://ttlc.intuit.com/questions/19014 ... th-the-irs

Here are some links with info about filing taxes for American Expats.

http://www.irs.gov/Individuals/Internat ... ens-Abroad
https://turbotax.intuit.com/tax-tools/t ... 19130.html
http://americansabroad.org/issues/taxat ... broad-faq/

IRS Tax Guide for US Citizens and Resident Aliens Abroad
http://www.irs.gov/pub/irs-pdf/p54.pdf
Last edited by Winston on Tue Apr 22, 2014 3:07 am, edited 1 time in total.
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