Do I have to file US taxes?

As an American, do you live abroad? 5 things you should know about American tax liability according to ‘TIME’.

As an American, do you live abroad? 5 things you should know about American tax liability according to ‘TIME’

Are you a random American or an American citizen living overseas? Did your parents make you a US citizen or do you hold a green card? It is possible that you are not even aware of your tax filing requirements in the USA.

Do you have to file a tax return in the United States, even if you never lived or worked there? Yes that's true. And that's because America is the only developed country in the world where tax liability is based on citizenship, not where you live and work. So even if you live in another country as a US citizen, you still have a tax liability.

Here are 5 simple facts you should know about American tax obligations:

1. I don't live in the US, so I don't have to file a US tax return.

Contrary to popular belief among 'expats', the obligation to file a US tax return does not end when you move to another country. America is one of two countries in the world (the other is Eritrea) that require tax returns from its citizens, regardless of where they live.

2. I don't have to pay any taxes, so I don't have to file an American tax return.

To avoid double taxation on income earned by US citizens abroad (i.e. taxes that are imposed by the US and also by the country of residence), US tax legislation contains measures that reduce or eliminate US tax obligations.

However, it does not eliminate the requirement to file an annual income tax return in the United States. If you fail to do so, the IRS may impose a fine. Late filing of your tax return may result in a fine of $ 10,000.

3. My balance with non-US banks is less than $ 10,000, so I don't need to notify the IRS of this money.

The FBAR (Foreign Bank and Financial Account Report) is an informal report submitted electronically to the Treasury Department. Any American account holder - with a financial interest in or authority to sign - one or more bank and / or financial accounts with more than $ 10,000 on any day during a calendar year must file an FBAR statement.

In the case of several bank and / or financial accounts, this means that the sum of all these accounts must be added up in order to check whether the threshold of $ 10,000 has been exceeded. This also includes current, savings and investment accounts, pension and investment funds.

4. Tax on my retirement plan is postponed in my country of residence and the same is believed to be the case in the United States.

In many countries, it is permissible to make use of deferred tax breaks through contributions to pension plans or other investment savings plans until the time of retirement, when the payments of the savings plan take place.

This fact does not affect the way the United States handles your overseas savings plans. In such a case, it could actually result in tax debt to the IRS. Since no 'tax credits' have been accumulated abroad, these cannot be offset against the American tax liability.

5. I have never declared American taxes before so I cannot do so without severe tax penalties from the IRS.

Many people are not informed that they can rely on tax amnesty programs with the IRS. With the so-called streamlined procedure, taxpayers who unintentionally did not make a declaration can retrospectively meet their tax declaration obligations without fear of fines.

If you take part, you only need to declare income tax for the last 3 years and FBAR for the last 6 years. Over the past few years, this has convinced tens of thousands of late tax filers to file their tax returns with the IRS.

More information about American tax liability

Americans overseas helps Americans living overseas comply with US tax laws and avoid unnecessary double taxation. Based on your personal situation, we will find you a suitable US tax advisor in our AOS network. He will make you a tailor-made offer to help you with your tax return. Free and without obligation.

Contact us now for more information