Enjoying a hike in Asia? Kicking back on a beach in the Caribbean? Who has time for taxes? However, reading this can save you thousands of dollars in unwanted penalties and fees.
Being a U.S. citizen or resident alien has its benefits. There is the right to religious freedom, freedom of speech and the right to live permanently in the United States. Those are the positives.
The downside? Well, contrary to what many people believe, U.S. citizens or resident aliens are taxed on their worldwide income regardless of where they live. The typical tax deadline is April 15. However, if you are outside of the country on that date, the IRS will allow a 2-month extension to file your tax return and pay any tax due.
Tax Tips For Americans Overseas
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If you haven’t filed tax returns for a while it would be in your best interest to do so. It is widely known that the only thing that goes away if you ignore them are your teeth, and well, that’s because they fall out. The IRS, on the other hand, should not be ignored. In certain cases, unpaid tax debt will prevent you from traveling outside of the United States.
According to Moswen James, an Enrolled Agent with Get Help Tax and Bookkeeping, there is still hope for American travelers who haven’t filed tax returns and have been working abroad.
“The silver lining is that there are deductions available if you file a tax return, including some for housing allowances. For 2016, you may exclude up to $101,300 of your foreign earned income from federal taxes,” says James, “The requirement though is that you must be either a bona fide resident of a foreign country or outside of the United States for at least 330 days over a 12 month period.”
There is also the FBAR which requires that you report any accounts over $10,000, in aggregate, in which you have signature authority or a financial interest.
Each individual’s financial situation is different so getting advice before you move abroad would be a smart decision. The last thing anyone wants to receive after happy travels is a huge tax bill upon his or her return.
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