Expat Tax Guide
If you are an American expat living abroad, there are some tax issues you should know about. Even though you live and work abroad doesn’t necessarily mean that you don’t have to pay taxes to the IRS. Below, you will find some important information regarding American expat tax liabilities.
The Foreign Earned Income Exclusion
Foreign earned income is defined as income that you received in another country. It can be both salary and any allowances for travel and lodging, etc. If you are in another country for a full calendar year or live in another country at least 330 days out of a 12 month period, you can earn an income exclusion of up to $80,000. In order to earn this income exclusion, you must file with the IRS and submit all the appropriate forms for the foreign earned income exclusion.
Expats and Self Employment Tax, US Social Security Tax and Medicare
For those expats that are employees of a US corporation, your company will usually withhold Social Security and, Medicare. If you are self employed (private contractor, freelancer, etc) in addition to any income tax that you owe to the IRS, you will also need to pay a self employment tax which covers Medicare and social security payments.
For expats that are employed by a foreign employer and in addition subject to foreign laws concerning social security tax, in most cases you will not be required to pay the IRS for social security tax.
Tax Treaties
It should be noted that the US has tax treaties with 60 other nations. To determine if you need to pay income tax or other forms of tax to the IRS, you should definitely look into the tax treaty for the country that you are working/living in. More information regarding tax treaties can be found at http://www.irs.gov.
Foreign Tax Credits
In many cases, you may be double taxed. This is paying tax on income in your host country, as well as in the US. There are many situations in which double taxation can occur, however there are special foreign tax credits that can help offset double taxation in many circumstances. While these tax credits may be complicated to figure out, with a little research you may be able to save thousands of dollars that you would normally lose due to double taxation.
Expat Tax Consultant Firms
Tax issues are extremely complicated if you reside in the United States and only become more complicated once you work in another country. Be prepared to do research both with the IRS and in your new host country. Services that can help are expat tax consultants which handle all sorts of expat tax situations. If you don’t have the resources to hire an expat tax service, you can find many expat communities that discuss tax situations along with many non profit organizations that help expats deal with their tax liabilities.
Articles on Expat Taxes
The goal of this article is to provide a comprehensive checklist of information for the US person to consider prior to accepting an assignment outside the US. This article is not designed to teach you the technical competence required to perform self compliance however, it will certainly arm you with what you need to know to determine if your US tax preparer knows all that they should know to provide you with adequate professional services.
Form 2555- Foreign Earned Income Exclusion’s Other Cousin
The goal of this article is to provide a comprehensive checklist of information for the US person to consider prior to accepting an assignment outside the US. This article is not designed to teach you the technical competence required to perform self compliance however, it will certainly arm you with what you need to know to determine if your US tax preparer knows all that they should know to provide you with adequate professional services.
To Be or Not to Be Self- Employed Versus Employed On a Foreign Assignment Outside the US
The goal of this article is to provide a comprehensive checklist of information for the US person to consider prior to accepting an assignment outside the US. This article is not designed to teach you the technical competence required to perform self compliance however, it will certainly arm you with what you need to know to determine if your US tax preparer knows all that they should know to provide you with adequate professional services.
Expat Tax Specialists
Protax Consulting Services,Inc.
Protax is a leading professional services tax accounting and consulting firm specializing in the delivery of world class tax accounting, consulting and compliance services to:
Individuals- Foreign national (non US citizens or non US green card holders here in the US), US expatriate (US citizens and US green card holders living outside the US), including high-net worth individual tax. This includes consultations on and / or explanations of your various compensation packages, including that as pertains to the individual tax equalization or tax protection arrangements.
Businesses- small business corporate tax- both regular “C” corporations and “S” corporations- and partnership tax, in addition to the rendering of accounting business management services- bookkeeping, financial statement review and analysis, cash flow management and projection, general business consulting and business formation services.
Protax also specializes in tax representations for individuals and small business corporations and partnerships.
