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US Citizens Living Abroad


US Citizens with Foreign Income

Foreign Bank Account Reports (FBARs)

Foreign Investment in US Real Estate

Foreign Company with US Business

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US Citizens Living Abroad

I am an American living abroad. Do I need to file a US tax return?

Yes. Regardless of where you live, as a United States citizen, if your annual income exceeds $9,000 you are required to file an annual tax return and report your worldwide income from all sources.
Nevertheless, U.S. citizens with foreign income are generally entitled to claim a foreign tax credit for foreign income taxes paid on their foreign income. Furthermore, U.S. citizens working abroad are entitled to a foreign earned income exclusion.

I am a Green Card Holder. Do I need to file a US tax return?

Yes, Green Card holders are generally subject to the same US tax obligations as US citizens.

I pay income taxes abroad. Do I need to pay additional taxes in the U.S?

If you pay income taxes on income from foreign sources (outside the U.S.) you are generally entitled to claim a foreign tax credit, which would offset your U.S. tax liability.

When is my tax return due?

For Americans living in the U.S., the tax return is due on April 15th or the following Monday (if the 15th falls on a weekend), following the end of the calendar year reported. A two month extension is automatically granted to citizens living abroad, until June 15th. If additional time is required, an additional extension request may be filed and the due date may be moved to October 15th.

Foreign Bank Account Reports (FBARs)

Who is required to file a Foreign Bank Account Report (FBAR)?

Generally, every U.S. person who has a financial interest or signature authority over any financial accounts in a foreign country, if the overall aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year.The penalties for non-filing FBARs are extremely harsh.  This report is filed separately, and not with the regular income tax return.

When is the FBAR due?

By June 30 following the calendar year reported. No extension of time is available.

What do I need to report about my foreign bank and/or financial accounts?

The information required to be reported on the FBAR includes the taxpayer’s personal identifying details, the full details of each foreign bank account and the highest balance in such account during the reported calendar year.

Starting for the 2011 tax year, a new Form 8938 has been added to the annual income tax return requiring U.S. taxpayers with specified foreign financial assets to disclose on their tax returns information about their foreign financial assets.

Foreign Investment in US Real Estate

I invested in US Real Estate. Do I need to file a U.S. tax return?

Generally, if you have rent income from US sources, while you may not necessarily be required to file an income tax return you are likely to be very interested to do so.

As a default investment income of a foreign investor is subject to a 30% tax rate on a gross basis. That is rent income of a foreign investor is subject to 30% withholding and taxed on a gross basis. If your rent income was indeed subjected to such withholding on a gross basis you may be exempt from filing a U.S. income tax return, but that of course would not be such a great benefit.

Alternatively, the foreign investor may elect to treat income as Effectively Connected Income (ECI) with a U.S. trade or business, which would result in taxing such income on a net basis. In order to be taxed on a net basis taxation the foreign investor would have to file a U.S. income tax return, and make an election to treat the rental income as ECI.

Needless to say, since in most cases, especially in real estate, the offsetting of expenses is very likely to result in much less of a tax liability, due to a lower taxable income, and lower tax rate (than the 30% flat withholding rate) it is probably wise to file an annual income tax return with the IRS and make the ECI election.

When a Foreign Investor sells US Real Estate is there any withholding?

The disposition of a U.S. real property interest by a foreign investor is subject to 10% income tax withholding on the amount realized from the sale, under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).

That is, the buyer is required to withhold 10% of the sale proceeds and if he fails to do so he may be held liable to pay the tax himself.


Foreign Company with U.S. Business

When is a foreign company required to file a U.S. tax return?

A foreign company will be required to file an income tax return if:
  • The foreign company overpaid U.S. taxes and is interested in a refund
  • The foreign company has a U.S. trade or business, regardless of whether the company had income or not.
  • The foreign company has U.S. source business income including income from the sale of real estate assets held indirectly through partnerships and/or other transparent entities such an LLC
  • The foreign company has U.S. source income as defined under the Internal Revenue Code
  • The Company has  U.S. office
  • The Company has a dependent agent

Is there a statute of limitations on unfiled U.S. tax returns?
  • There is no statute of limitations on delinquent returns.
  • In addition, a foreign company’s failure to timely file a tax return may result in disallowance of credits and deductions. Thus under such case the foreign company may end up being subject to tax on a gross basis. 
  • If a foreign corporation is uncertain whether it is engaged in a U.S. trade or business, the office continued, it may file a protective return
  • If a foreign company is entitled to an exemption from tax based on an Income Tax Treaty with a foreign country, a U.S. tax return must be filed to disclose such treaty position and claim the benefit.
  • Note that while a Foreign Company may be exempt from tax on a Federal Income tax level, it may be required to file income tax returns on a state level.
  • There are only few certain very specific exceptions to the general rule requiring tax reporting

When are the tax returns of a foreign company due?
  • Generally, March 15 following the end of the calendar year being reported
  • A foreign company with no U.S. office, whose books and records are outside the U.S. may be entitled to an automatic 3 month extension to June 15
  • An additional extension to September 15th may be requested


 
 
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