·
If you are a US Citizen you must file a US tax return every
year unless your income is less than
$ 9,500 (for 2011
and lower for earlier years) or have self employment-independent
contractor net income of more than $ 400 US per year.
You are taxable on your world wide income and required to report it
regardless of whether you filed a tax return in your country of
residence.
·
As an US expatriate living abroad on 4/15, your 2011 tax
return is automatically extended until 6/15 but any taxes due must be
paid by 4/15 to avoid penalties. The return can be further
extended until 10/15/12 if the proper extension is filed. You may
even be able to get a further extension until 12/15if you send the
IRS the proper letter.
·
For 2011 if you are a qualified expatriate you get a foreign
earned income exclusion (earnings from wages or self employment) of
$92,900, but this exclusion is only available if you file a tax
return.
·
If your spouse works and lives abroad, and is qualified, she
can also get at $92,900 foreign earned income exclusion. A foreign
housing deduction or exclusion is also available if you earn in
excess of the foreign earned income exclusion. This amount varies by
country.
·
You get credits against your US income tax obligation for the
taxes paid to a foreign country on that same income but you must file
a return to claim those credits.
·
If you own 10% or more of a foreign corporation,
LLC or partnership or are a beneficiary of a Foreign Trust such as a
Fideicomiso in Mexico, you must file special IRS forms each year or
incur substantial penalties which can be greater including criminal
prosecution if the IRS discovers you have failed to file these forms.
·
Your net self employment income or independent contractor
income is subject to US self employment tax of 15.3% (social
security) which cannot be reduced or eliminated by the foreign earned
income exclusion unless you work in one of the few countries the US
Social Security Administration has a social security agreement with
and pay social security to those countries. If you live in one of
those countries you must secure a required certificate to prove your
exemption from US self employment tax.
·
If at any time during the tax year your combined highest
balances in your foreign bank and financial accounts such as
brokerage accounts, cash surrender value of foreign life insurance
policies, foreign pensions, etc. (when added together) ever equal or
exceed $10,0US you must file a FBAR form with the IRS by June 30th
for the prior calendar year or incur a penalty of $10,000 or more
including criminal prosecution. This form does not go in with your
personal income tax return and is filed separately to a different
address.
·
In
the several past year the IRS has hired more than 2,000 new employees
to audit, investigate and discover Americans living abroad who have
failed to file all necessary tax forms.
·
Often due to foreign tax credits and the the foreign earned
income exclusion expats living abroad when filing all
past year unfiled tax returns and end up owing no or very little US
taxes.
·
Beginning in 2011a new law is in effect which requires all US
Citizens report all of their world wide financial assets if in total
the value of those assets are $50,000 or more on form 8938.
·
Income from certain types of foreign corporations are
immediately taxable on the US shareholder's personal income tax
return. If your corporation only provides your personal
services to customers you may have a Foreign Personal Holding Company
which would cause all income to be immediately taxable to you.
Income may also be immediately taxable when the income is from
investments, rents, etc. This is call “Subpart F” income.
·
If you own investments in a foreign corporation or own a
foreign mutual fund shares you may be required to file the IRS forms
for owning part of a Passive Foreign Investment Company (PFIC) or
incur additional, taxes and penalties for your failure to do so. A
PFIC is any foreign corporation that has more than 75% of its gross
income from passive income or 50 percent or more of its assets
produce or will produce passive income.
·
The IRS is now matching up your US passport with your US tax
records and knows if you have not been filing all
required US tax returns while you are living Abroad. The
IRS will shortly start matching up information received from Foreign
Banks with US tax returns and required FBAR forms. If you have not
been reporting, now is the time to start.
· Download your 2011 US tax return questionnaire prepared expressly for Americans living in Abroad HERE.
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Don D. Nelson, CPA, Attorney (Kauffman Nelson LLP) has been assisting US Citizens , Permanent Residents and nonresidents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 plus years. He offers his clients attorney-client privilege which is not available from other tax accountants. He has helped hundreds of US expatriates around the world “catch up” filing their past late returns most often with little or no tax cost to you the delinquent taxpayer. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.
Our Tax Services Include
US Expatriate and International Tax Return Preparation.
US Nonresident return preparation.
Review of IRS International Tax Forms Prepared by you or your tax preparer.
Preparing and filing tax returns for past years – Our “Catch Up” tax service.
Surrender of US Citizenship or Green Card Tax Planning and Assistance.
International Business Tax Planning and compliance.
IRS Offshore Voluntary Disclosure Reprsentation and filing.
IRS Audit Representation with respect to Expatriate and International Tax Issues
Mini Tax Consultations are available for you to discuss your situation with Don your personally and secure his counsel resolving your tax problems and future tax planning by phone or email. No personal visit is required. All consultations are subject to the absolut privacy and confidentiality of Attorney-client privilege. LEARN MORE HERE.
Some of these rules might apply to expatriates and nonresidents. The foreign earned income exclusion and foreign tax credit rules do remain the same as the past. However if you own a foreign corporation the new GILTI tax may apply and force you to pay tax on undistributed income from your foreign corporation. 
