When talking about US taxes and taxation of US citizens who live abroad, you may have heard of the Foreign Tax Credit. A U.S. citizen or resident alien who pays income taxes in another country can claim a tax credit against their U.S. federal income tax bill to avoid double taxation, ensuring they are not taxed twice on the same income. Double taxation refers to the situation where income is taxed both in the country where it is earned and again in the U.S. You can offset your US tax liability by claiming the foreign taxes paid to another country. This way, you can bring your tax owing down to ..read more

If you’re an American living abroad, understanding the intricacies of the US tax system is crucial. This guide aims to simplify the tax filing process for you, highlight the important deadlines for 2023, and shed light on various deductions and credits that can be financially beneficial. Staying informed and compliant with US tax laws is essential as you embark on your international lifestyle. Key Takeaways US expats must file tax returns if their income exceeds certain thresholds and report foreign income in US dollars. The 2023 tax deadline is April 15, with an automatic extension to June ..read more

Navigating the complex landscape of tax regulations, particularly for U.S. expats, requires the expertise of skilled tax professionals. Understanding the differences between various tax experts such as Certified Public Accountants (CPAs), who often work for public accounting firms, and Enrolled Agents (EAs) is crucial for individuals and businesses to make informed decisions when selecting the right professional for their specific tax situations. Designation Enrolled Agent (EA) US CPA Foreign accounting designations Percent of required curriculum in US tax 100% 20% Zero Work experienc ..read more

Understanding the Foreign Tax Credit (FTC) is crucial for U.S. expats looking to reduce their tax liabilities. This guide offers a detailed examination of the steps required to qualify for, calculate, and claim the FTC. It aims to help you maximize this tax advantage. We’ll discuss everything from the basic eligibility criteria to advanced tactics, providing practical examples and expert insights to enhance your tax return strategy as an expat. What Is the Foreign Tax Credit? Definition and Purpose The Foreign Tax Credit (FTC) is designed to help U.S. taxpayers avoid the double taxation of inc ..read more

Living abroad brings its own set of adventures and challenges, especially when it comes to navigating U.S. tax obligations. If you’re an expat with a financial footprint across borders, you’ll need to familiarize yourself with IRS Form 8938, a key component of the Foreign Account Tax Compliance Act (FATCA). What is Form 8938? Form 8938, titled “Statement of Specified Foreign Financial Assets” is a tax form required by the U.S. Internal Revenue Service (IRS) for taxpayers to report their specified foreign financial assets if the total value of those such foreign bank assets exceeds certain thre ..read more

Navigating the intricate world of expat taxes presents unique challenges and reporting obligations for self-employed U.S. citizens living abroad. Understanding the nuances of foreign income, tax treaties, and self-employment taxes is crucial for maintaining compliance with the IRS while optimizing financial health. What Constitutes Foreign Self-Employment Income? Foreign self-employment income refers to the income earned by self-employed individuals who work outside of the United States. The IRS defines self-employment income as any income earned through a trade or business when you are a sole ..read more

For US expatriates, navigating the process of submitting their annual income tax return to the Internal Revenue Service (IRS) can present unique challenges. While the convenience of electronic filing (e-filing) offers an efficient way to submit your federal tax return, certain conditions may require you to submit a paper tax return by mail. Understanding when and how to accurately mail your personal income tax return is crucial to ensure compliance with the IRS and avoid unnecessary processing delays. Why E-Filing Should Be Your First Choice for Taxes? Before delving into the specifics of mail ..read more

For US expats ready to renounce their citizenship, understanding the final legal and tax steps is essential. Form 8854, the Initial and Annual Expatriation Statement, marks the conclusive stage in breaking ties with the U.S. tax system. At 1040 Abroad, we specialize in navigating the complexities of Form 8854, offering the insights needed to finalize your departure from U.S. tax obligations confidently. This article is your definitive guide to completing Form 8854, the ultimate step in your expatriation journey. What is Form 8854? Form 8854 is a tax form used by long-term residents relinquishi ..read more

Navigating the complexities of US tax obligations can be a daunting task, especially for Americans living abroad. Among the myriad of forms and regulations, Form 8621 and the concept of Passive Foreign Investment Companies (PFICs) stand out as particularly challenging for US expats. This guide aims to demystify PFICs and the requirements surrounding Form 8621, ensuring you stay compliant while maximizing your financial strategy overseas. What is a PFIC? A Passive Foreign Investment Company (PFIC) is a foreign corporation that meets either the income or asset test specified by the IRS. Specific ..read more

Even if you’ve moved abroad for a brighter future, you still might have obligations towards the IRS. What happens if you earn income from sources outside the United States? If you live abroad, you might qualify for the foreign earned income exclusion (FEIE). This article explains what FEIE is and how it works, and provides some examples of situations where you might benefit from claiming it. The U.S. retains its right to tax citizens and Green Card holders who live abroad and they must file their taxes even if they’re not physically present in the country. The foreign earned income exclusion ..read more