What Americans Need To Know About US Expat Tax

Taxes are complicated enough to figure out when you’re living in the US; when you’re an expat living abroad, it can seem practically impossible to keep track of all the forms and rules and exceptions necessary to file US taxes properly. On top of that, the penalties for failing to properly file US expat tax are disastrous. And while it’s true that there are people purposely failing to pay their taxes, there are also plenty of well-meaning people who make mistakes simply because they don’t know any better. To make sure you file US expat tax properly, here’s some of the information you need to know.

Don’t Skimp On Paperwork

Contrary to popular belief, Americans living abroad still need to file US taxes. That said, it is true that US expat tax differs from regular tax, and that this can mean you have to pay less taxes, or that, when all is said and done, you may not owe anything in taxes. This can, however, lead to Americans making a dangerous mistake: not filing US tax returns. Even if you don’t owe a penny, you still need to declare your earnings and holdings and fill out all of the paperwork required by the IRS. While filing tax returns when you don’t actually owe taxes seems like a massive pain, it’s a necessary one, and that task, as tedious as it may be, is far more preferable than getting in trouble with the IRS.

Know Your Assets

Even though you won’t be taxed on wealth, if you are a US expat, you do need to declare any foreign holdings and assets to the IRS. While this may sound simple, it can actually be very complicated since there are many things other than foreign bank accounts that are included in this category. For example, many Americans don’t realize that things like security deposits or insurance policies can be considered foreign accounts or assets – but to make matters even more complicated, they might not count for US expat tax purposes, either. Furthermore, many Americans living abroad are married to foreigners and share their accounts and holdings with their spouse. This changes the way those accounts are considered by the IRS as well. If you’re a US expat, you need to figure out what accounts and assets you need to declare. It can be very advisable to work with a tax consultant to make sure you understand how the IRS views your assets and what you need to declare.

Return Into Compliance

If you’ve made mistakes in filing US expat tax in the past and are worried about facing penalties, you don’t need to be. The IRS’s tax amnesty programs allow late filers to return into compliance without facing any penalties. If you are a non-willfully delinquent taxpayer, you can take advantage of the Streamlined Filing Compliance Procedures and wipe your slate clean. Instead of living in fear of facing repercussions for your mistakes, come back into compliance by starting the procedures as soon as you can.