5 Things you must know about US Expat Taxes
Moving to any other country is an amazing opportunity for many
Americans to travel the world and live life king size. Whether your motivation
is to get your Zen or to take your career to the next level, it is easier than
ever to pack up your bags and relocate to a new country as long as you stay
compliant with your US expat tax return.
If you earn money in a foreign country and not understanding your US
tax obligations can definitely lead to some very serious consequences. But
don't worry, we distilled the fundamentals of Tax filing for US citizens
living abroad to help them out. There we have mentioned the top 5 things you
must know about US expat taxes.
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As an Expat, you Receive an automatic Tax Filing Extension Until June 15th
Filing Us Tax Returns When Living Abroad on the tax deadline of April 15th get an
extension until June 15th to file. But any US taxes owed are due by April 17th
avoid huge penalties and interest. If you come back to the US, you may still be
eligible to use certain US expat deductions and exclusions that year. However,
you will need to file by April 17th as you are now a US resident.
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Having social security the number and paying taxes means you are eligible for COVID 19 stimulus check
You can qualify for a $1,000 COVID stimulus check if you fall within
the income threshold and have a social security number and file taxes as the US
expat. Nontaxpayers who live abroad may qualify too.
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The Foreign Housing Exclusion
If you earn over the foreign earned income exclusion threshold and
rent your home abroad, then you can exclude a further amount of your earned
income-based on your housing rental expenses and subject to the internal
revenue system limits simply by claiming the foreign housing exclusion.
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The Foreign Tax Credit
It lets you claim US tax credits up to the same value as foreign
taxes that you have paid on the same income. Also, it can be claimed on form
1116 and can be applied to both passive and earned income. But, it can't be
applied to the same income as the foreign earned income deductions.
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You can amend a previous tax return if you made a mistake
If you find that you have failed to report some of your income on
the tax return or even if you did not take all the deductions allowed, you have
to file an amended return for that tax year simply by using for 1040X. Keep in
mind that filing an amendment before the IRS catches the mistake is the best
option as huge penalties are often less. Also, the clock starts ticking as well
as the amended return will need to be filed before a certain date in order to
seek a refund or credit when the original return has been filed.
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