Living and working in another country does not exempt U.S. citizens from having to pay taxes. The IRS will still expect you to file your returns on time each year and pay what you owe to the government. You can avoid expensive penalties and comply with the U.S. tax codes by learning how and when to file taxes while you are living and working abroad.
E-Filing from Abroad
E-filing can be an invaluable resource to filing and paying your taxes when you live in another country. The IRS recommends that you e-file because it is:
- faster
- easier
- more secure
- grants you instant notification of when the IRS receives and processes your return
You can use any of the free e-filing services found online to submit your return and pay your taxes. This service helps you avoid expensive fines that can come with paying late and also spares you the process of having to complete and mail in paper returns.
What Forms to E-File
What forms are expatriate U.S. citizens encouraged to e-file? Some of the more common tax forms that you may need to file depending on your living and employment circumstances include:
- 1040 and 1040A for individual tax income
- 1099-DIV for dividends and distributions
- 1099-INT for interest income
- 2225 for foreign earned income exclusion
- 3903 for moving expenses
- SE for self-employment income
- 8939 for statement of foreign financial assets
These are but a few of the e-file tax forms that you may be required to file along with your return. You can find these forms and others on IRS.gov.
What Income to Claim
Along with learning what forms you should fill out and submit, you also must know what forms of income to claim on your return. The IRS requires that you claim all income in U.S. currency even if you get paid in the form of money used in the country in which you live. You can use an online currency converter to get the latest exchange rate before filing your taxes.
The IRS requires that you claim your gross income, that is all money that you derive from employment, self-employment, goods, property, and services before taxes are withheld. You also must include all interest that you earn from foreign bank or financial accounts.
Lower Your Tax Burden
Depending on how much you earn each year, you may face paying a significant amount in taxes to the IRS. Just like taxpayers at home, you may be entitled to use deductions and exemptions to ease your tax burden.
For example, the IRS allows you to claim the Foreign Earned Income Exclusion if you are eligible, which can save you up to $101,300 on your foreign income. You may also be allowed to use the Foreign Tax Credit, which allows you to offset taxes dollar for dollar that you paid to your host country in U.S. tax dollars.
Finally, you can file for the foreign housing exclusion, which permits you to exclude certain household expenses that you incur as a result of living and working abroad. These deductions and exemptions as well as several others help you lower what you owe to the IRS and could entitle you to a refund.
Getting Help to File Your Taxes Abroad
You may think that you cannot get any help when it comes to filing your taxes because you do not live or work in the U.S. You can actually get help with your tax returns and find answers to many of your questions by visiting IRS.gov.
You can also find tax professionals who are available to help you online. Tax pros know the federal tax codes as they apply to overseas residents and workers. A tax pro can help you avoid penalties and also ensure that your returns get filed in a timely and efficient manner.
When you live and work abroad, you must file and submit your U.S. federal tax returns by the April 15 deadline. The fact that you do not live in the U.S. and that you may be paid in foreign currency does not exclude you from this important obligation. You can learn how and when to file your taxes and what forms to e-file while living abroad by keeping these important details in mind next tax season.
