What Are Expat Tax Services?

What Are Expat Tax Services?

Expat Tax services is the assistance provided to U.S. citizens and green card holders living in a foreign country who are required to file U.S. tax returns even if they live outside of the United States. Perhaps more importantly, U.S. citizens need to declare any and all income earned worldwide to the IRS, regardless of where they are residing or where that income was earned, and file any necessary forms along with applicable credits for taxes paid overseas (ie Foreign Earned Income Exclusion; Foreign Tax Credit).

 

Expat Taxes: A Step-By-Step Guide To Filing

1. Know Your Filing Requirement: First thing you do is see whether your worldwide income exceeded the IRS threshold for filing.
2. Collect Foreign Income Documents: Continue to gather foreign income documents, such as payslips or bank statements.
3. Select Tax Advantages: Next, pick Foreign Earned Income Exclusion (Form 2555) or the Foreign Tax Credit (Form 1116).
4. Next, if you have foreign accounts which are greater than $10k, file the FBAR (FinCEN Form 114).
5. File Your Own Tax Return: Once you complete the trail through Form 1040 by June 15th (the expat deadline).

 

 

 

Foreign Tax Credit vs. Foreign Earned Income Exclusion

Feature	FEIE	FTC
Eligibility Requirements	Must satisfy either physical presence test or residency test	Sufficient foreign tax payment
Form Used	Form 2555	1116 Form
Maximum Exclusion/Credit	Up to $126,500 (in 2024)	Credit for foreign taxes paid
Purpose	Exclude foreign earned income	Reduce double taxation

 

 

Common Expat Tax Deadlines

• June 15th: Automatic extension for expats to file Form 1040.

• October 15th: Additional extension available through Form 4868.

• April 15th: Deadline for FBAR (FinCEN Form 114), extendable to October 15th.

 

 

Qualification for the Foreign Earned Income Exclusion (FEIE)

In order to qualify for the Foreign Earned Income Exclusion, expats have to satisfy either the Bona Fide Residence or Physical Presence test — demonstrating significant time spent overseas.

• Bona Fide Residence Test: You must live overseas as a bona fide resident for an entire tax year.
• The Physical Presence Test: Be outside the United States for at least 330 days of a 12-month period.

 

 

Differences Between FEIE and FTC for Expats

It is also important to distinguish between the Foreign Earned Income Exclusion (FEIE) which excludes foreign income and the Foreign Tax Credit (FTC) which reduces U.S taxes based on foreign taxes paid. So speaking to an advisor may be the best way to assess options.

• FEIE: Allows you to exclude income for work performed outside the U.S. from U.S. taxation
• Foreign Tax Credit (FTC): taxes paid to a foreign state are credited against U.S. taxes dollar-for-dollar.
• Determine which option offers you the greatest tax benefit—you may want to work with an expat tax advisor on this.

 

 

Do Expats Pay State Taxes?

Some states tax expats if they maintain residency. Expats seeking to create more implicit tax savings should implement the far-and-away state resident strategy.

• Varies by State: Some states require tax filing if residency is maintained.
• How to Avoid State Taxes: Establish foreign residency and consider steps to change your state residency status.

 

 

Our Services

• U.S. Expats Tax Return Preparation: We offer customized assistance with Form 1040, 2555 and the other schedules as needed
• Optimizing the Foreign Tax Credit: Next, we help you with Form 1116 to capture credit for foreign taxes that were paid.
• FBAR and FATCA Compliance: Our services also include preparation of FinCEN Form 114 (FBAR) and Form 8938 for the reporting of foreign assets.
• Support For Foreign Housing Exclusion And Deduction: We also help claim housing expense deduction for amounts paid that qualify as foreign housing costs.
• Tax Treaty Advisory: We advise you on how to leverage treaty provisions to minimize double taxation.
• Streamlined Filing Compliance Procedures: We offer services to help catch up on past filing obligations without penalties.
• Advisory Services: Finally, we have tailored advisory for U.S. tax planning and lowering U.S. tax exposure.

 

 

Conclusion

Dimov CPA — Specialized Expat Tax Services The expat tax services offered by Dimov CPA range from preparation of your tax return to foreign tax credit optimization and FBAR compliance. Our team keeps the expats compliant with U.S. tax laws, yet helps them minimize their overall tax liability. For professionals, contact Dimov CPA now!