U.S. Taxes Living Abroad – Adventures and Headaches
MiklosCPA works with US Citizens and permanent residents across the globe when it comes to tax time. This is why our accounting practice is a listed expat advisor on many of the US Embassy websites abroad.
More than ever, many US citizens are taking their lives, and often their businesses overseas. Understanding and navigating the income tax implications is a daunting task. The United States is one of the few countries imposing unique restrictions and reporting requirements to her citizens and their worldwide income; yes, we’re talking taxes living abroad.
If you are a US citizen and you lived in a foreign country during the past year, you may be taxed on your income even if none of it was earned in the USA. But there is some good news! If you lived abroad long enough, you may qualify for the Foreign Earned Income Exclusion and for certain Foreign Housing Exclusions and Deductions as well. The IRS recognizes that being a bona fide resident of another country, you can claim income exclusion of up to $102,100 for 2017.
For example, let’s say you are a US Citizen doing business in China as a self-employed consultant for most of the last year. You earned $90,000 for your consulting services and your business deductions were $20,000. This will result in a net profit of $70,000. If you qualify for the Bona Fide Resident Test and lived in China for most of the year you may qualify for the Foreign Earned Income Exclusion (Form 2555) and have the $70,000 excluded from US taxable income when you file your IRS Form 1040. That’s a great savings! (You may have to check if your income earned as a consultant will be subject to self-employment tax even when it is earned abroad.)
Do not forget about the other reporting requirements such as FATCA and FBAR. Remember, filing an incorrect or incomplete US return will not save you from interest and penalties.
Which forms are you required to file and when are the taxes due? The CPA practice of MiklosCPA is here to answer these questions and address other tax related challenges while you enjoy working in another country and building your business.
Contact MiklosCPA for assistance with determining if you qualify for this, or any other, tax saving exclusion. We provide solutions to your problems and help you plan to save the most of your hard earned money in the present and future years, whether you are doing business at home or filing your taxes living abroad.
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