Expatriate Tax Advice: What Are the Filing Requirements for U.S. Expats?

What U.S. Expats Need to Know About IRS Filing Requirements

Many expatriates have questions about how to handle their taxes while living abroad. There are many things to consider such as: Do I have to file U.S. income tax return? What about state taxes? And what if any income taxes can I deduct? 

The U.S. tax code can be complicated and confusing for expatriates. It is always best to consult an experienced tax attorney to reduce your tax burden and to also help you understand your rights and responsibilities.

It is important to understand that no matter where you live in the world, as a United States Citizen or a Permanent Legal Resident you are required to file an annual return with the Internal Revenue Service (IRS) if you meet the minimum income requirements. In 2014, the minimum income requirement for a single person less than 65 years of age was $10,150. A married couple both under 65, filing jointly, faced a minimum income requirement of $20,300. The United States does have treaties with several countries that may reduce the total amount you owe.

When it comes to U.S. state tax returns each state sets its own rules. The rules can be complicated and it is best to consult a professional when it comes to filing state returns. States like California, New Mexico, Virginia, and South Carolina have very strict rules when it comes to filing state returns after moving abroad.

Filing Requirements for U.S. Expats

Another area of confusion for expatriates is whether their income might qualify for the Foreign Earned Income Exclusion (FEIE). The IRS qualifies you as eligible for the Foreign Earned Income Exclusion (FEIE) if you fall into one of three categories:

1. You are citizen of the US who qualifies as a bona fide resident of another country for a period of time containing one entire tax year.
2. You are a resident alien of the US whose home country has an income tax treaty with the US. Additionally, you must be a bona fide resident of another country for a period of time containing one entire tax year.
3. You are a citizen or resident alien of the US whose physical absence from the US constitutes a minimum of 330 days out of any 365.

There may also be deductions for any taxes you have paid to your country of residence.

As with any matter involving the U.S. Tax Code there are many pitfalls to trying to figure out what you can legally deduct from your income and how you can minimize your risks of an audit. It is best to consult an experienced tax attorney before filing your taxes. A consultation will help reduce your risk of mistakes on your tax returns and avoid costly audits.