FAQ

I am a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?

Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.

 

I pay income tax in a foreign country. Do I still have to file a U.S. income tax return even though I do not live in the United States?

You have to file a U.S. income tax return while working and living abroad unless you abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you renounce your U.S. citizenship under certain circumstances.

 

What is the due date of a U.S. income tax return?

The due date for filing a federal individual income tax return generally is April 15 of each year if your tax year ends December 31st. 

If you cannot file by the due date of your return, you can request an extension of time to file.

However, if you are a U.S. citizen or resident alien, who is living outside of the United States and your main place of business is outside of the United States you are allowed an automatic 2-month extension until June 15 to file your return and pay any tax due.

 

I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?

In general, if you are a U.S. citizen or resident alien married to a nonresident alien, you are considered “Married Filing Separately” unless you qualify for a different filing status. If you pay more than half the cost of keeping up a home for yourself and a qualifying child or other relative, you may qualify for the head of household filing status.

If you are a U.S. citizen or resident alien married to a nonresident alien, you and your spouse can choose to have your spouse treated as a U.S. resident for all U.S. federal income tax purposes. This allows you and your spouse to file a joint return, but also subjects your nonresident alien spouse’s worldwide income to U.S. income tax.

 

I am a U.S. taxpayer residing abroad and I have a child who was born abroad. Can I claim my child as a dependent on my tax return?

In general, you can claim exemptions for individuals who qualify as your dependents. To be your dependent, the individual must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins.

Children usually are citizens or residents of the same country as their parents. If you were a U.S. citizen when your child was born, your child generally is a U.S. citizen. This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent.

You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN.

 

What is the meaning of a notice I recently received from the IRS that says I owe a whole lot more money for prior year tax return that I already filed?

Generally, the IRS will send a notice if it believes you owe additional tax, are due a larger refund, if there is a question about your tax return or a need for additional information.

 

How does the U.S. Internal Revenue Service (IRS) calculate interest and penalties?

Generally, interest is charged on any unpaid tax from the due date of the return (without extensions) until the date of payment.

 

What deductions and/or credits am I allowed on my U.S. income tax return as a U.S. citizen living and working in a foreign country?

U.S. citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a foreign tax credit on foreign income taxes or an itemized deduction for eligible foreign taxes. However, if you take the foreign earned income exclusion your foreign tax credit or deduction will be reduced.

If eligible, you can claim a foreign tax credit on foreign income taxes owed and paid by filing Form 1116 with your U.S. income tax return. 

 

If my foreign earned income is below the foreign earned income exclusion threshold amount, am I still required to file a U.S. individual income tax return?

Yes, since the foreign earned income exclusion is voluntary, you must file a tax return to claim the foreign earned income exclusion.  It does not matter if your foreign earnings are below the foreign earned income exclusion threshold.

There are specific requirements that you must satisfy to be eligible to claim the foreign earned income exclusion. 

 

Who needs to apply for an Individual Taxpayer Identification Number (ITIN)?

You need an ITIN if you are not eligible to get a social security number but must provide a taxpayer identification number on a U.S. tax return or information return

 

When and how do I apply for an Individual Taxpayer Identification Number (ITIN)?

You need an ITIN as soon as you are ready to file your federal income tax return, since you need to attach the return to your application.  To apply for an ITIN, complete Form W-7, Application for IRS Individual Taxpayer Identification Number.

 

What is the purpose of the Form W-8 BEN?

Foreign persons are generally subject to U.S. withholding tax at a 30% rate on the gross amount of certain income they receive from U.S. sources. By providing a completed Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to the U.S. payer (also known as the U.S. withholding agent) before or at the time income is paid or credited, you are:

  • Establishing that you are not a U.S. person,

  • Claiming that you are the beneficial owner of the income for which Form W-8BEN is being provided, and

  • If applicable, claiming a reduced rate of, or exemption from, withholding as a resident of a foreign country with which the United States has an income tax treaty. In order to claim a reduced rate or exemption from tax under an income tax treaty, the Form W-8BEN must include a valid U.S. taxpayer identification number.

The completed Form W-8BEN is provided to the U.S. payer (also known as the U.S. withholding agent) before or at the time income is paid or credited.

 

This website and the information contained on this page is for informational purposes only and does not constitute advice, opinion, recommendation or an offer to act in some way.

 

Minster & Kohavi 

Certified Public Accountants

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