This is the second part of two blogs (see part one here) running over on our sister site, beijing-kids.com, which will hopefully shed some light on how you (if you happen to be an expatriate US citizen) file taxes and why you need to be filing them. This year, US citizens living abroad will need to file their taxes by June 15.
In part one of my ‘Tax Filing for US Expats & the IRS’ I looked at the landscape that US expats face when it comes to filing their annual tax return. The long and short of this article; US citizens and green card holders are subject to worldwide taxation and must file their income tax return annually. In Part Two I want to focus more on the information you need to file your own tax returns.
I am often asked in meetings whether I can refer my clients to an accountant. The answer to this question is of course, yes. We have an extensive network of tax professionals that are able to assist our clients. However, there is a cost attached to using an accountant and for many people I believe this can be avoided.
What Forms Do I Need To Complete?
The majority of people that I meet have very simple tax filing requirements and can complete their own taxes by understanding a few basic forms:
The 1040 is the form where you state all of your various incomes, deductions and credits. This form will ultimately determine that amount of tax you are due to pay, or be refunded.
The 2555 and 2555EZ
If you pass either the Bona Fide Residence Test or Physical Presence Test then you will qualify for the Foreign Earned Income Exclusion and will need to state your income on the 2555 or 2555EZ. Generally speaking most people can fill in the simpler version of this form; the aptly named 2555EZ.
If you have self-employment income, want to claim the housing exclusion or deduction, or have business and moving expenses, then you will likely need to use the full 2555 form. If you are doing this I would advise you seek help from a tax professional.
The Report of Foreign Bank and Financial Accounts (FBAR) is the form I find many people miss during their filing. Importantly, this is a US Treasury form not an IRS form, which is why it is often missed. You are required file the FBAR when the aggregate value of all foreign financial accounts exceeded USD 10,000 at any time during the calendar year.
If you are a US expatriate with income below the Foreign Earned Income Exemption (USD 100,800 in 2015) and no foreign assets, these three forms will likely be all that you need to file. The 1040 and 2555EZ are two pages each and the FBAR can now be filed online. People with this simple situation could save themselves anywhere USD 200-700 per year by taking a few hours to complete these forms.
To read more about how to file your taxes and whether your should file jointly or separately then click through to the remainder of the article on beijingkids.
Photo: Images Money (Flickr)
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