Paying US Taxes as an Expatriate

August 13th, 2012 by The JetSetter Team | Comments Off on Paying US Taxes as an Expatriate

The unfortunate answer is often yes. We’ve included a few general items of interest regarding foreign earned income below but it should in no way replace the advice of a tax professional.

The bad news is your income might be subject to US income taxes no matter where you live. The good news is that certain exclusions may apply to money you spend paying foreign income taxes and/or housing in a foreign country. Likewise, there are many countries which have reciprocal tax agreements with the United States allowing you to exclude your US earned income from being taxed by their jurisdiction.

If all this sounds like it could get confusing in a hurry, you’re probably right, though it doesn’t have to. The reason we suggested you contact a tax pro is that assumptions you might naturally make regarding the payment of taxes could get you in trouble, maybe even stuck with a big tax bill plus penalties.

Filing status

In general, you’re required to file US income taxes even if you’re a US citizen or resident alien living in another country. As with normal taxpayers, age, filing status, gross income, and whether or not someone else can claim you as a dependent determines whether or not you have to file a tax return.

The following factors do NOT automatically remove your liability to Uncle Sam:

  1. Income is paid in foreign currency.
  2. Foreign

    country imposes an income tax, or…

  3. The income is excludable under the foreign earned income exclusion.

The main thing to keep in mind when it comes to living abroad is that distance does not affect the IRS’s claim on part of your income. And don’t make the mistake of thinking they won’t notice. They will, and you’ll probably be sorry as a result. The only way to get away from US income taxes for good is to actually relinquish your citizenship and move. Note we didn’t say this is automatically a good idea, but it is a possibility.

One thing is certain. Expatriation is not a decision to be taken lightly. You better be darn sure before you go (Top image: Flickr | DonkeyHotey).

The Jetsetter Show Team


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