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IRS Issues for Americans abroad

IRS Guide for Individuals living abroad

IRS References, all available from IRS Website:

Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

Publication 514, Foreign Tax Credit for Individuals

Form 2555 (PDF), Foreign Earned Income

Form 2555EZ (PDF), Foreign Earned Income Exclusion

Form 1116 (PDF), Foreign Tax Credit

Tax Topic 853, Foreign Earned Income Exclusion - General

Excerpts from above and other IRS pages:

You "are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States."

The IRS uses exchange rates from The Federal Reserve Board.

"Certain Taxpayers Related to Foreign Corporations Must File Form 5471 Certain U.S. citizens and U.S. residents who are officers, directors, or shareholders in certain foreign corporations must file form 5471." Basically if you own 10% or more of a foreign based corporation, this may apply to you.

"Form 926 - Filing Requirement for U. S. Transferors of Property to a Foreign Corporation. U.S. persons, domestic corporations or domestic estates or trusts must file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, to report any exchanges or transfers of property described in section 6038B(a)(1)(A) to a foreign corporation."

"You are required to file the form TDF 90-22.1, Report of Foreign Bank and Financial Accounts, if they have $10,000 or more in a financial account held in a foreign country during the year."

U.S.-China Income Tax Treaty: The U.S. - China income tax treaty does not apply to Hong Kong, and does not apply to Macau."

"Changes in the Foreign Earned Income Exclusion: For tax year 2006 the maximum amount of the Foreign Earned Income Exclusion (IRC sect. 911) has been increased to $82,400."

Re: 2006 Housing Allowance amount: "Assuming that the entire taxable year of a qualified individual is within the applicable period, the section 911(c)(1)(B) amount for 2006 is $13,184 ($82,400 x .16)." This number is subject to change with new releases, but is the only guidance available as of January 7, 2007. Higher exclusions apply to high cost areas. See IRS website under Individual Taxpayers--> International Taxpayers -- for more information.

"Significant Penalty Imposed for Not Filing Expatriation Form: The Internal Revenue Service reminds practitioners that anyone who has expatriated or terminated his U.S. residency status must file Form 8854, Initial and Annual Expatriation Information Statement, or face a significant penalty.

If you are an Individual Taxpayer, and you claim:

You claim the foreign earned income exclusion

You claim the foreign housing exclusion or deduction

Your tax home is in a foreign country or countries throughout your period of bono fide residence or physical presence, whichever applies.

file your return with the: Internal Revenue Service Center, Austin, TX 73301-0215

Taxpayers located outside the U.S. may also contact the IRS by mail at: Internal Revenue Service, P.O. Box 920, Bensalem, PA 19020

Or you may telephone or FAX the Philadelphia Service Center office at: Tel: 215-516-2000); Fax: 215-516-2555

"[E]effective January 1, 2007, International business taxpayers filing business returns where the taxpayer resides outside the U.S. (941, 1120, etc...) as well as "foreign specific" returns regardless of where the taxpayer resides (1120-F, 3520, 3520-A, 1042, 8288, 8804, etc...) should file their returns at: Internal Revenue Service, PO Box 409101, Ogden, UT 84409

Taxpayers filing foreign Estate and Gift (706/709) and Excise Tax (720, 730, and 2290) returns should file those returns at: Internal Revenue Service, Cincinnati, Oh 45999-0045, USA

For private delivery service: Internal Revenue Service, 201 W Rivercenter Blvd., Covington, KY 41011-1424, USA

Revenue Ruling 2002-23, 2002-18 IRB 811 provides that federal tax returns mailed by taxpayers in foreign countries will be accepted as timely filed if they bear an official postmark dated on or before midnight of the last date prescribed for filing, including any extension of time for such filing.

FAQs

I live in a foreign country and only have earnings from a job in that country. They already tax me. Do I have to file a US tax return?

When do I have to file my taxes?

What information do I need to gather?

How much does tax preparation cost?

Can I get the earned income tax credit?

How do I know that my return is correct?

If I am entitled to a tax refund, how will I get my money?

Can you prepare my Offshore Trust Income Tax Returns?

Can you prepare my Self-Employment, Partnership and/or Corporation tax returns?

I live in a foreign country and only have earnings from a job in that country. They already tax me. Do I have to file a US tax return?

You are taxed on worldwide income.

Unfortunately, the IRS taxes US citizens on their worldwide income, and whether you earn money in the US, your foreign country of residence, or virtual income from an internet based business, you are required to report it. There is only one legal way to avoid it: renounce your citizenship and become a citizen of another country. As a foreign resident, you know better than most people what that means. Even then there is a catch. Depending on your income and/or assets, you may still have filings and tax with the IRS for up to 10 years. For more details, see the IRS Website.

If you are living and working abroad, you do get to exclude up to $82,400 of earned income for 2006, claim a housing exclusion or deduction, and get a credit for foreign taxes paid. Those alone should be some consolation.

When do I have to file my taxes?

Foreign based US tax filers:

As a US Tax filer based in a foreign country, you are automatically granted a 2 month extension from April 15 to June 15 of the year following your tax year. If you need more time, you can also request the automatic 6 month extension. (six months from April 15).

What information do I need to gather?

Make sure to have the following materials available for your tax interview:

Dates of arrival in foreign country

Date of anticipated return to US, if any

Wage statements - if in foreign language, a translation of the monetary entries

Employer paid housing information (local cost)

Pension, or retirement income

Social Security card(s)

Passport(s)

Driver's license(s)

Dependents' Social Security numbers and dates of birth

Last year's tax return

Information on education expenses

Commissions received and/or paid

Interest income from cash accounts, bonds & other interest bearing instruments

Dividends received

Sales of stocks and/or bonds

Self-employed business income and expenses

Lottery and/or gambling winnings and losses

Foreign Taxes paid

State refund amount

Social Security and/or unemployment income

Income and expenses from rentals

Alimony paid or received

Record of purchase or sale of real estate

Medical and dental expenses

Real estate and personal property taxes

Estimated taxes paid

Cash and non-cash charitable donations

Mortgage or home equity loan interest paid

Unreimbursed employment-related expenses

Job-related educational expenses

Childcare expenses and provider information

How much does tax preparation cost?

Tax Return Preparation Cost

The cost of tax preparation depends on the complexity of the tax return. Fees are set locally at each office and in the local currency, but a typical return generally starts at about US$250 for a basic return.

Can I get the earned income tax credit?

Earned Income Tax Credit

Unfortunately, the Earned Income Tax Credit may only be taken if you do not take the foreign earned income tax exclusion and foreign housing allowances. Only your circumstances determine which is better for you.

How do I know that my return is correct?

Our Guarantee

When you pay for tax preparation with us, you are automatically covered under our guarantee which entitles you to reimbursement of penalties and interest charged by the IRS if one of our tax preparers makes an error preparing your tax return. You will still be liable for the tax, just as you would have been had an error not been made. Terms and conditions apply.

If I am entitled to a tax refund, how will I get my money?

Disbursement Options

The IRS will disburse your refund to you by check (mail) or by direct deposit.

Check: The IRS will mail a check to your home in 21-28 days.

Direct Deposit: If you choose the IRS Direct Deposit option, the IRS will deposit your refund directly into your personal bank account. This requires your local (foreign) bank) to be able to accept direct deposits.

Can you prepare my Offshore Trust Income Tax Returns?

Offshore Trust Income Tax Returns

Foreign Corporation Tax Returns

Foreign Disregarded Entities, etc.

Contact us if these affect you as there are numerous filing requirements.

Can you prepare my Self-Employment, Partnership and/or Corporation tax returns?

Self-employed & Other Business Income

Self-Employment income reporting is included in preparation of your 1040, but of course we'll need your income from all sources (itemized), expenses & depreciation schedules or information.

We can also prepare other returns for your foreign businesses.

Yes, we also do Corporation tax returns for US companies, but remember if your corporation is not a US corporation, you will need these prepared for the jurisdiction where your corporation is located.

XP Tax Services
XPTaxPrep@yahoo.com
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© 2007 XP Tax Services. All Rights Reserved.

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	IRS Issues for Americans abroad	IRS Guide for Individuals living abroad IRS References, all available from IRS Website: Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad Publication 514, Foreign Tax Credit for Individuals Form 2555 (PDF), Foreign Earned Income Form 2555EZ (PDF), Foreign Earned Income Exclusion Form 1116 (PDF), Foreign Tax Credit Tax Topic 853, Foreign Earned Income Exclusion - General Excerpts from above and other IRS pages: You "are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States." The IRS uses exchange rates from The Federal Reserve Board. "Certain Taxpayers Related to Foreign Corporations Must File Form 5471 Certain U.S. citizens and U.S. residents who are officers, directors, or shareholders in certain foreign corporations must file form 5471." Basically if you own 10% or more of a foreign based corporation, this may apply to you. "Form 926 - Filing Requirement for U. S. Transferors of Property to a Foreign Corporation. U.S. persons, domestic corporations or domestic estates or trusts must file Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation, to report any exchanges or transfers of property described in section 6038B(a)(1)(A) to a foreign corporation." "You are required to file the form TDF 90-22.1, Report of Foreign Bank and Financial Accounts, if they have $10,000 or more in a financial account held in a foreign country during the year." U.S.-China Income Tax Treaty: The U.S. - China income tax treaty does not apply to Hong Kong, and does not apply to Macau." "Changes in the Foreign Earned Income Exclusion: For tax year 2006 the maximum amount of the Foreign Earned Income Exclusion (IRC sect. 911) has been increased to $82,400." Re: 2006 Housing Allowance amount: "Assuming that the entire taxable year of a qualified individual is within the applicable period, the section 911(c)(1)(B) amount for 2006 is $13,184 ($82,400 x .16)." This number is subject to change with new releases, but is the only guidance available as of January 7, 2007. Higher exclusions apply to high cost areas. See IRS website under Individual Taxpayers--> International Taxpayers -- for more information. "Significant Penalty Imposed for Not Filing Expatriation Form: The Internal Revenue Service reminds practitioners that anyone who has expatriated or terminated his U.S. residency status must file Form 8854, Initial and Annual Expatriation Information Statement, or face a significant penalty. If you are an Individual Taxpayer, and you claim: You claim the foreign earned income exclusion You claim the foreign housing exclusion or deduction Your tax home is in a foreign country or countries throughout your period of bono fide residence or physical presence, whichever applies. file your return with the: Internal Revenue Service Center, Austin, TX 73301-0215 Taxpayers located outside the U.S. may also contact the IRS by mail at: Internal Revenue Service, P.O. Box 920, Bensalem, PA 19020 Or you may telephone or FAX the Philadelphia Service Center office at: Tel: 215-516-2000); Fax: 215-516-2555 "[E]effective January 1, 2007, International business taxpayers filing business returns where the taxpayer resides outside the U.S. (941, 1120, etc...) as well as "foreign specific" returns regardless of where the taxpayer resides (1120-F, 3520, 3520-A, 1042, 8288, 8804, etc...) should file their returns at: Internal Revenue Service, PO Box 409101, Ogden, UT 84409 Taxpayers filing foreign Estate and Gift (706/709) and Excise Tax (720, 730, and 2290) returns should file those returns at: Internal Revenue Service, Cincinnati, Oh 45999-0045, USA For private delivery service: Internal Revenue Service, 201 W Rivercenter Blvd., Covington, KY 41011-1424, USA Revenue Ruling 2002-23, 2002-18 IRB 811 provides that federal tax returns mailed by taxpayers in foreign countries will be accepted as timely filed if they bear an official postmark dated on or before midnight of the last date prescribed for filing, including any extension of time for such filing.

	FAQs	I live in a foreign country and only have earnings from a job in that country. They already tax me. Do I have to file a US tax return? When do I have to file my taxes? What information do I need to gather? How much does tax preparation cost? Can I get the earned income tax credit? How do I know that my return is correct? If I am entitled to a tax refund, how will I get my money? Can you prepare my Offshore Trust Income Tax Returns? Can you prepare my Self-Employment, Partnership and/or Corporation tax returns?

	I live in a foreign country and only have earnings from a job in that country. They already tax me. Do I have to file a US tax return?	You are taxed on worldwide income. Unfortunately, the IRS taxes US citizens on their worldwide income, and whether you earn money in the US, your foreign country of residence, or virtual income from an internet based business, you are required to report it. There is only one legal way to avoid it: renounce your citizenship and become a citizen of another country. As a foreign resident, you know better than most people what that means. Even then there is a catch. Depending on your income and/or assets, you may still have filings and tax with the IRS for up to 10 years. For more details, see the IRS Website. If you are living and working abroad, you do get to exclude up to $82,400 of earned income for 2006, claim a housing exclusion or deduction, and get a credit for foreign taxes paid. Those alone should be some consolation.

	When do I have to file my taxes?	Foreign based US tax filers: As a US Tax filer based in a foreign country, you are automatically granted a 2 month extension from April 15 to June 15 of the year following your tax year. If you need more time, you can also request the automatic 6 month extension. (six months from April 15).

	What information do I need to gather?	Make sure to have the following materials available for your tax interview: Dates of arrival in foreign country Date of anticipated return to US, if any Wage statements - if in foreign language, a translation of the monetary entries Employer paid housing information (local cost) Pension, or retirement income Social Security card(s) Passport(s) Driver's license(s) Dependents' Social Security numbers and dates of birth Last year's tax return Information on education expenses Commissions received and/or paid Interest income from cash accounts, bonds & other interest bearing instruments Dividends received Sales of stocks and/or bonds Self-employed business income and expenses Lottery and/or gambling winnings and losses Foreign Taxes paid State refund amount Social Security and/or unemployment income Income and expenses from rentals Alimony paid or received Record of purchase or sale of real estate Medical and dental expenses Real estate and personal property taxes Estimated taxes paid Cash and non-cash charitable donations Mortgage or home equity loan interest paid Unreimbursed employment-related expenses Job-related educational expenses Childcare expenses and provider information

	How much does tax preparation cost?	Tax Return Preparation Cost The cost of tax preparation depends on the complexity of the tax return. Fees are set locally at each office and in the local currency, but a typical return generally starts at about US$250 for a basic return.

	Can I get the earned income tax credit?	Earned Income Tax Credit Unfortunately, the Earned Income Tax Credit may only be taken if you do not take the foreign earned income tax exclusion and foreign housing allowances. Only your circumstances determine which is better for you.

	How do I know that my return is correct?	Our Guarantee When you pay for tax preparation with us, you are automatically covered under our guarantee which entitles you to reimbursement of penalties and interest charged by the IRS if one of our tax preparers makes an error preparing your tax return. You will still be liable for the tax, just as you would have been had an error not been made. Terms and conditions apply.

	If I am entitled to a tax refund, how will I get my money?	Disbursement Options The IRS will disburse your refund to you by check (mail) or by direct deposit. Check: The IRS will mail a check to your home in 21-28 days. Direct Deposit: If you choose the IRS Direct Deposit option, the IRS will deposit your refund directly into your personal bank account. This requires your local (foreign) bank) to be able to accept direct deposits.

	Can you prepare my Offshore Trust Income Tax Returns?	Offshore Trust Income Tax Returns Foreign Corporation Tax Returns Foreign Disregarded Entities, etc. Contact us if these affect you as there are numerous filing requirements.

	Can you prepare my Self-Employment, Partnership and/or Corporation tax returns?	Self-employed & Other Business Income Self-Employment income reporting is included in preparation of your 1040, but of course we'll need your income from all sources (itemized), expenses & depreciation schedules or information. We can also prepare other returns for your foreign businesses. Yes, we also do Corporation tax returns for US companies, but remember if your corporation is not a US corporation, you will need these prepared for the jurisdiction where your corporation is located.


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