Q1. Do I still need to file a tax return if my income is below the foreign earned income exclusion amount?
Yes, even if your foreign earned income is under the current year exclusion amount, you are still required to file a tax return.
Q2. What are tax benefits available to U. S. Expats in order to eliminate double taxation?
1. Foreign Earned Income Exclusions: a) you must meet either Bona Fide Residence Test or Physical Presence Test, b) the amount can be excluded for 2024 tax year is the lesser of $126,500 or Foreign Earned Income, c) Income above the exclusion amount are taxed using tax rate had not claimed exclusions.
2. Foreign Housing Exclusions: a) Foreign housing limitation is $37,950 for 2024.
b) The base housing amount is $20,240 for 2024
3. Foreign Tax Credit: a) allowable FTC is the lesser of creditable FTC or FTC limit, b) the foreign earned income above the exclusion amount might be able to take FTC, c) unused FTC can be carried back 1 year and carried forward 10 years.
Q3. What is the Bona Fide Residence Test and Physical Presence Test?
1. Bona Fide Residence Test: Resident of foreign country for an entire tax year.
2. Physical Presence Test: Physically present in foreign country 330 full days during any period of 12 consecutive months.
Q4. Do I still need to file state returns while living and working abroad?
It depends on which state you were a resident before. The income tax regulations for the expats varies by states. If you own rental properties or the state has individual income tax filing requirements, you might have to file a state income tax return.
Q5. How are my federal tax liabilities calculated when I take the foreign earned income tax exclusion?
It will be calculated if you had not claimed the foreign earned income tax exclusions.
Q6. Can I deduct my moving expenses from the U.S.A. to the foreign country or from the foreign country back to the U.S.A.?
No. It was repealed by 2017 Tax Cuts and Job Acts. Starting from 2018 tax year, no deduction of moving expenses is allowed.
Q7. I have a non U. S. Citizen spouse. What are my options?
1. You can file a Married Filing Separate return or Head of Household if you have a dependent.
2. Your spouse can be treated as a resident and file a Married Filing Jointly return. If your spouse doesn't have a SSN, they will need to apply ITIN.
Q8. What are the filing requirements for FinCen 114 and Form 8938?
1. FinCen 114: a) The aggregated value in all foreign financial accounts exceeds $10,000 anytime during the year, b) the form must be electronically filed with Department of Treasury, c) the deadline is June 30 every year, no extension available , d) the records must be kept for 5 years, 4) it applies to both individuals and U.S. business entities, 5) IRS clarifies that Single Member LLC is also required to file a separate FinCen 114.
2. Form 8938 Year end Anytime of year
a) Americans Living in U.S.A. $50K(Single) /$100K(MFJ), $75K(Single)/$150K(MFJ)
b) Americans Living abroad: $200K(Single)/$400K(MFJ), $300K(Single)/$600K(MFJ)
c) it is filed with IRS due with normal tax filing including extension 3. If you meet both thresholds, you are required to file both forms.
Q9. What are the options available if I haven't file federal income tax returns and/or FBAR?
As of Feb 2023, Streamlined Filing Compliance Procedure are available for taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willfull conduct on their part. The requirements for US taxpayers residing in the US and Outside the US are different. If you did not have unreported income, you might be eligible to file delinquent foreign information report under "Delinquent FBAR Submission Procedures", or "Delinquent International Information Return Submission Procedures". Please consult a tax advisor.
Q10. Can I claim child tax credit or dependent care credit if my child was born in the foreign country?
Yes, however, the child has to have a valid SSN.
