Living and working overseas is not a free pass from paying US taxes. No matter where Americans call home, Uncle Sam still expects his cut.
How to look after your Uncle Sam
Living and working overseas is not a free pass from paying US taxes. No matter where Americans call home, Uncle Sam still expects his cut. April 15, tax day in America, is right around the corner. And while Americans living abroad might not be making the midnight run to the post office to ensure the envelope gets the required April 15 postmark, they must still be ready to file a return.
The good news? The US Internal Revenue Service gives American expats an automatic two-month extension to June 15. But in order to get it, the taxpayer should file an explanation statement with the IRS confirming that they qualify. That will give you two more months to gather your receipts, fill out the forms and cobble together the funds you owe Washington. But the bad news is that if you use the extension, you will be on the hook for interest charges accrued from April 15 to the date the taxes are paid.
Like all American taxpayers, US expatriates must fill out the standard 1040 form. But they additionally must also fill out either the 2555 form or the 2555-EZ form. Essentially, those who own property and/or who have self-employment income will probably want to use the longer form. Individuals may use the EZ form if total earnings total less than US$85,700. Keep in mind, however, that if you file using the EZ form there is no allowance to take deductions for housing and self-employment income.
That's the easy part. Not surprisingly, it gets a bit murky from there. According to the IRS, the exclusion for foreign income only applies to US citizens and resident aliens who have been living abroad for 330 days or more. Also, many expats could owe state or other local taxes. To help get the answers to these questions, it's best to solicit the help of a tax professional. For more copies of the IRS forms and more information on them, please visit these websites:
The 2555 form: www.irs.gov/pub/irs-pdf/f2555.pdf Instructions: www.irs.gov/pub/irs-pdf/i2555.pdf The 2555-EZ form: www.irs.gov/pub/irs-pdf/f2555ez.pdf Instructions: www.irs.gov/pub/irs-pdf/i2555ez.pdf firstname.lastname@example.org