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Expatriates American Tax:
Frequently Asked Questions

 

<I am working in Asia, how does the tax preparation process work?

<What Information Do You Need From Me to Prepare My Return?

<I hear a lot about foreign bank accounts reporting requirement. what should I report? 

<Is that true that I  Have to Report my worldwide Income on my tax return?
<How Do I Know if I Qualify for the Foreign Earned Income Exclusion?

<I am a Green Card Holder and live in Europe. I have not filed my US taxes for few years. What are the consequences?

<What is Audit Shield?

<What are the U.S. federal income tax rates for 2010?

<Are Green Card holders liable for filing a U.S. tax return?

<Is a U.S. citizen liable for a U.S. tax return?

<I am a Green Card holder working  for a foreign company, should I report it to the IRS?

<What is the foreign earned income exclusion?

<Can I deduct housing expenses I pay abroad?

<Can I deduct foreign taxes paid?

<When should I file my U.S. tax return?

<Where do I file my US Federal tax return?

<What if I change my address?

 

I am working in Asia, how does the tax preparation process work?


We try to keep the process extremely user friendly, simple and at the same time detailed oriented to make sure we cover all aspects of your taxes. Step 1 - one of our accountants will contact you, introduce him or herself, answer any preliminary questions and learn a bit more about your particular situation. Step 2 - a secure account will be set up for you online where we and you will upload a documents checklist and tax questionnaire for you to complete.  Step 3 - At this point your accountant will prepare an initial draft of your return and send it to you for review.  If there are any open questions, from either you or your accountant, they will contact you via email to fill in the gaps. Step 4 - Once you approve the return we will invoice you for the completed tax return. Soon after you will receive the final tax return with detailed filing instructions and e-file submission option.

  

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What Information Do You Need From Me to Prepare My Return?


We have prepared a very efficient checklist of documents and data we require to prepare and finalize your return while making sure you take advantage of each and every tax break allowed to you by law. Once you start the process you will receive an email with the checklist and explanation attached to each item. Your accountant will further explain any issue that you have with one or more of the items from that list.

  

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I hear a lot about foreign bank accounts reporting requirement. what should I report? 


If you have foreign bank accounts and they have had over $10,000.00 in them at any time during the tax year you must report them to the US Treasury. Failure to file may result in large penalties (i.e. over $10,000) depending on the amount of money you have in your accounts. You can report your accounts using form TD F 90-22-1.  Make sure you also report any income earned abroad from those accounts, including interest, dividend, capital gains, etc...  

  

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Is that true that I  Have to Report my worldwide Income on my tax return?


Yes, it is correct. The U.S. tax code requires a U.S. person (for tax purposes) to report income earned in or outside of the U.S. This means that as an Expatriate earning monies in countries other the U.S., you must report your foreign income on top of your U.S. income. If you failed to so in previous years, you will need to file amended tax returns and report all of your income.  

  

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How Do I Know if I Qualify for the Foreign Earned Income Exclusion?


According to the IRS you qualify if you are: • A US citizen who is a bona fide resident of a foreign country (i.e. living in a foreign country) or countries for an uninterrupted period that includes an entire tax year OR • A US resident alien who is a citizen or national of a country with which the US has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, OR • A US citizen or US resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

  

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How do I know if I qualify for the Foreign Earned Income Exclusion?


 According to the IRS you qualify if you are: • A US citizen who is a bona fide resident of a foreign country (i.e. living in a foreign country) or countries for an uninterrupted period that includes an entire tax year • A US resident alien who is a citizen or national of a country with which the US has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or • A US citizen or US resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

  

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I am a Green Card Holder and live in Europe. I have not filed my US taxes for few years. What are the consequences?


As a Green Card holder, you are considered a U.S. person for tax purposes and liable for filing a U.S. tax return if you meet the minimum income requirements. If you have failed to do so you may be subject to penalties that are based on the actual tax due for each year. If you are married to a non-US spouse and considering moving to the US, you will likely need to show (at a minimum) your last three years of tax returns to prove that you can provide support for your spouse. We highly recommend you file the missing tax returns as soon as possible and allow our experts to represent you before the  IRS and bring your account with them to a current status by completing all the filing and asking the IRS to waive any and all penalties.

  

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What is Audit Shield?


When you sign up for "Audit Shield" we shall handle all communications and meetings with the IRS or state taxing agency, from receipt of the first notice to completion of the audit. Specifically will Defend your income tax returns in an audit through the highest level of appeals Schedule and attend all audit appointments Review your tax return for additional problem areas Review your documentation before the IRS sees it Make all audit phone calls Handle all audit correspondence Prepare requests for appeals conferences Prepare a U.S. Tax Court Petition, if necessary Minimize the financial impact of an audit The starting price for the current year membership is $79.99. Past years may be more expensive as there is a higher likelihood of an audit.

  

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What are the U.S. federal income tax rates for 2010?


The rates start with 10% and go up to 35%. Your filing status (Single, Married, Married filing Separate Return, Head of Household and Qualified Widower) will determine the set of tax brackets that applies to you. For detailed lists of tax brackets please click here

  

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Are Green Card holders liable for filing a U.S. tax return?


Yes - if you are a permanent U.S. resident you are considered to be a resident for tax purposes and must file a U.S. tax return, even if you are currently living outside of the U.S.

  

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Is a U.S. citizen liable for a U.S. tax return?


The U.S. tax code taxes U.S. citizens on their world-wide income regardless of where it is earned, paid, or received. Living outside of the U.S. gives you certain tax benefits that are not available in the U.S. Nonresident aliens (e.g. an individual without permanent residency in U.S.) are subject to tax only on their US source income.

  

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I am a Green Card holder working  for a foreign company, should I report it to the IRS?


If you work for a foreign company, you must report your income, as foreign income on your U.S. tax return. Your foreign employer should provide you with a W2 equivalent (a document that shows your annual earned income and tax paid through your employer) and convert those numbers to U.S. Dollars. In addition to salary, if you are reimbursed or receive an allowance for certain living expenses, you must include these amounts as income. Examples are cost of living allowances, overseas differential, housing reimbursement or allowance, education reimbursement for your children's schooling, reimbursement of home leave expenses, payment of foreign tax on your behalf, etc. You also need to report as income the fair market value of housing, a car, meals or other benefits provided by your employer.

  

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What is the foreign earned income exclusion?


You qualify for the foreign earned income exclusion (up to $91,400) if you are a U.S. citizen or resident alien (e.g. Green Card holder), you have a tax home in a foreign country, and you meet either the foreign residence test or the physical presence test. It is important to keep track of the dates you are in the U.S. when you live overseas. These dates will help determine if you qualify for the foreign income exclusion, and they must be listed on IRS Form 2555, Foreign Earned Income, when you prepare your tax return. If you are traveling in the U.S. on business, you will be expected to report some amount of income as earned in the U.S. on that trip.

  

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Can I deduct housing expenses I pay abroad?


Yes, all your housing expenses, including amounts paid for rent, repairs, utilities, real and personal property insurance, furniture rental, residential parking fees, etc. can be used to calculate the foreign housing exclusion or deduction. Not all expenses are deductible housing expenses, such as mortgage interest payments, telephone charges, the cost of domestic help, purchased furniture, deductible taxes, or the cost of improvements to property. Also, if your income is below the maximum exclusion for the year (currently $91,400), housing expenses are irrelevant because the housing exclusion or deduction will not benefit you.

  

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Can I deduct foreign taxes paid?


Yes, income taxes paid to a foreign country can be claimed as a foreign income tax credit and can reduce your U.S. income tax. Your other option is to deduct these foreign income tax payments as an itemized deduction. If you elect to take the foreign earned income exclusion (discussed above), the credit is reduced.

  

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When should I file my U.S. tax return?


For most people it is April 15th, but for U.S. citizens living abroad or resident aliens (e.g. Green Card holders) an automatic extension is given to June 15th. However, interest on any balance due to the IRS will be charged from April 15th.

  

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Where do I file my US Federal tax return?


If living abroad, you return should be mailed to
 
Internal Revenue Service Center, 
Austin, TX 73301-0215, 
USA.

  

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What if I change my address?


If you change your mailing address you should notify the IRS using Form 8822. If you are changing both your home and businesses addresses, you need to complete two forms.

  

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