If
you
are
a
US
Citizen
you
must
file
a
US
tax
return
every
year
unless
your
taxable
income
is
less
than
$20,300
-
for
a
joint
return
or
$
10,150
-
for
a
single
return
or married filing separately (these
amounts
are
for
2014
and
are
lower
for
earlier
tax years)
or
have
self
employment-independent
contractor
net
self
employment
income
of
more
than
$
400
US
per
year.
You
are
taxable
on
your
worldwide
income
regardless
of
whether
you
filed
a
tax
return
in
your
country
of
residence.
You
must
file
a
tax
return
each
year
if
you
income
exceeds
the
amounts
stated
above
even
if
you
owe
no
tax.
As
a
US
expatriate
living
and
working
abroad
4/15,
your
2014
tax
return
is
automatically
extended
until
6/15/15
but
any
taxes
due
must
be
paid
by
4/15/15
to
avoid
penalties
and
interest.
The
return
can
be
further
extended
until
10/15/15
if
the
proper
extension
form
is
filed.
An
even
further
extension
may
be
available.
For
2014
if
you
are
a
qualified
expatriate
you
get
a
foreign
earned
income
exclusion
(earnings
from
wages
or
self
employment)
of
$99,200,
but
this
exclusion
is
only
available
if
you
file
a
tax
return.
You
must
qualify
under
one
of
two
tests
to
take
this
exclusion:
(1)
bonafide
resident
test
or
(2)
physical
presence
test.
You
can
read
more
about
how
to
qualify
in
IRS
Publication
54.
This
exclusion
only
applies
to
income
taxes
and
does
not
apply
to
US
self
employment
tax
(social
security
plus
medicare).
You spouse who lives and works abroad with you will also be able to
use this exclusion against any earned income they have abroad.
For
2014 if you qualify for the entire year for the foreign
earned income exclusion (form 2555) you
will be excluded from having to comply with the health insurance
rules (or possible penalties)
of
Obamacare (ACA).
If
your
foreign
earnings
from
wages
or
self
employment
exceed
the
foreign
earned
income
exclusion
you
can
claim
a
housing
expense
for
the
rent,
utilities
and
maintenance
you
pay
if
those
amounts
that
exceed
a
minimum
amount
of
$15,872
(for
an
entire
year)
up
to
a
maximum
amount
which
varies
by
your
foreign country
of
residence.
You
get
credits
against
your
US
income
tax
obligation
for
income
taxes
paid
to
a
foreign
country
but
you
must
file
a
US
tax
return
to
claim
these
credits.
If
you
own
10%
or
more
of
a
Foreign
corporation
or
Foreign
partnership
(LLC)
you
must
file
special
IRS
forms
or
incur
substantial
penalties
which
can
be
greater
including
criminal
prosecution
if
the
IRS
discovers
you
have
failed
to
file
these
forms.
If
you
create
a
foreign
trust
or
are
a
beneficiary
of
a
foreign
trust
you
may
be
obligated
to
file
forms
3520
and
/or
3520A
each
year
to
report
those
activities
or
be
subject
to
severe
penalties.
Foreign
foundations
and
non-profits
which
indirectly
benefit
you
may
be
foreign
trusts
in
the
eyes
of
the
IRS.
Your
net
self
employment
income
in
a
foreign
country
(earned
as
an
independent
contractor
or
in
your
own
sole
proprietorship)
is subject
to
US
self
employment
tax (medicare and social security) of
15.3%
which
cannot
be
reduced
or
eliminated
by
the
foreign
earned
income
exclusion.
The
one
exception
is
if
you
live
in
one
of
the
very
few
countries
that
have
a
social
security
agreement
with
the
US
and
you
pay
that
countries
equivalent
of
social
security.
Your investment income (passive income) may also be subject to a
3.8% additional medicare tax if you income as a married filing
jointly exceeds $250,000 or $200,000 if filing as single.
Forming
the
correct
type
of
foreign
corporation
and
making
the
proper
US
tax
election
with
the
IRS
for
that
corporation
may
save
you
significant
income
taxes
and
avoid
later
adverse
tax
consequences.
You
need
to
take
investigate
this
procedure
before
you
actually
form
that
foreign
because
it
can
be
difficult
to
make
that
election
later.
If
at
any
time
during
the
tax
year
your
combined
highest
balances
in
your
foreign
bank
and
financial
accounts
(when
added
together)
ever
equal
or
exceed
$10,000US
you
must
file
a
FBAR
form
114 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
can only be filed
separately
on the web at:
In
the
past
several
years
the
IRS
has
hired
thousands
of
new
employees
to
audit,
investigate
and
discover
Americans
living
abroad
who
have
failed
to
file
all
necessary
tax
forms.
These
audits
have
begun
and
will
increase
significantly
in
the
future.
The
IRS
gets
lists of
Americans
applying
or
renewing
for
US
passports
or
entering
the
country.
They
will
compare
these
lists
with
those
who
are
filing
US
income
tax
returns
and
take
action
against
those
who
do
not.
Often
due
to
foreign
tax
credits
and
the
the
foreign
earned
income
tax
expats
living
abroad
who
file
all
past
year
unfiled
tax
returns
end
up
owing
no
or
very
little
US
taxes.
The
IRS
has
several
special
programs
which
will
help
you
catch
up
if
you
are
in
arrears
which
will
reduce
or
possibly
eliminate
all
potential
penalties
for
failing
to
file
the
required
foreign
asset
reporting
forms.
We
can
direct
you
to
the
best
program
for
your
situation,
prepare
the
returns
and
forms
and
represent
you
before
the
IRS.
Beginning
in
2011
a
new
law
went
into
effect
which
requires
all
US
Citizens
report
all
of
their
world
wide
financial
assets
with
their
personal
tax
return
if
in
total
the
value
of
those
assets
exceed
certain
minimum
amounts
starting
at
$50,000
.
Failure
to
file
that
form
8938
on
time
can
result
in
a
penalty
of
$10,000.
The
form
is
complex
and
has
different
rules
that
apply
to
you
if
you
live
abroad
or
live
in
the
US.
This
form
is required
in
addition
to
the
FBAR
form.
114.
Certain
types
of
income
of
foreign
corporations
are
immediately
taxable
on
the
US
shareholder's
personal
income
tax
return.
This
is called
Subpart
F
income.
The
rules
are
complex
and
if
you
own
a
foreign
corporation
you
need
to
determine
if
these
rules
apply
to
you
when
you
file
the
required
form
5471
for
that
corporation.
If
you
own
investments
in
a
foreign
corporation
or
own
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.
Download
your
2014
US
tax
return
questionnaire
prepared
expressly
for
Expatriates
at
www.TaxMeLess.com
or
www.expatattorneycpa.com
Send us your completed questionnaire and we will immediately provide
you with a flat fee quote for preparing your return.
Don
D.
Nelson,
US
Attorney,
CPA,
Kauffman Nelson, LLP
Dana Point, California 92629 USAUS Phone: (949) 481-4094, US Fax: (949) 606-9627Email:ddnelson@gmail.com or ustax@hotmail.com Skype: dondnelson
Dana Point, California 92629 USAUS Phone: (949) 481-4094, US Fax: (949) 606-9627Email:ddnelson@gmail.com or ustax@hotmail.com Skype: dondnelson
Visit
our International
Tax
Blog
for
the
Latest
Expat
and
International
Tax
Developments
at
www.usexpatriate.blogspot.com.
We
have
been
preparing
tax
returns
and
assisting
US
clients
located
in over
60
countries
around
the
the
world
for
over
35 years.
We
also
assist
US
Nonresidents
meet
their
US
tax
obligations
and
return
filing
requirements.
Email,
skype
or
phone us
for
immediate
assistance.
We
offer
mini consultations
(with
attorney
client
privilege)
to
answer
your
tax
questions
and
resolve
your
tax
issues.
For
additional useful informaton and tax assistance go to
www.TaxMeLess.com
and www.usexpatattorneycpa.com
D
isclaimer
and
Conditions:
The
information
contained
herein
is
general
in nature
and
is
not
to be
construed
or
relied
on as
tax
or
legal
advice
with
respect
to you
individual
tax
situation
or
questions.
Your
use
of
this
material
does
not
create
any
attorney/CPA
relationship
between
you
and
this
firm
or
any
other
obligation.
You
are
advised
to retain
competent
tax
professionals
help
with
your
individual
tax
matters
and
for
appropriate
answers
your
specific
tax
questions.
