Are you a US citizen living abroad? Are you confused and not sure what the regular filing procedures are for taxes in 2022? A tax advisor will make a world of difference.
Are you looking for a professional tax advisor to help you with your Federal Income Tax Returns? Saddock Advisory has a team of experts to assist with your tax filing in 2022! We assist with all tax issues, including guidance regarding expat tax services.
Did you know the Internal Revenue Service (IRS) taxes you according to your citizenship? Even if you are an American citizen living in a foreign country? Many countries will tax you according to your residency. They will also tax you on your income earned within their borders.
Taxes based on income earned are regardless of your residency status. We refer to this system as territorial-based income tax.
Tax Filing Obligation As A US Citizen Living Abroad
Whether you live in the Seychelles, the Cayman Islands, or South Africa, the United States will tax you if you are an American citizen. This is based according to your worldwide taxable income. Expats need to file claims for credits or exemptions to reduce or cut their US tax bill. Filing requirements overseas are a lot more complicated than filing your taxes in the US.
As a US expat, you must report foreign bank and financial accounts. You might also have to declare foreign registered businesses or assets you might own.
Our team of tax advisors is here to assist with your taxes in 2022. We have been in business for 37 years, facing a variety of challenges for our clients. It’s doubtful there is a problem we can’t help solving together.
Knowing When & How To Pay Taxes When Abroad
If you are a green card holder or a US citizen and earn over $12,550 in 2021 globally, you will have federal tax obligations.
- You will also pay taxes if you are self-employed and earn $400. If you are married to a foreign citizen, you will pay $5 of any earnings, which you will file separately.
- You need to report your worldwide income to the Internal Revenue Service.
- Individual taxpayers that are holders of US passports and are permanent residents outside the US need to file a US income tax return. We refer to these individuals as Accidental Americans.
Does Currency Matter?
The short answer: Yes, it does. You must convert any foreign money into dollars when earning abroad. Consistency is key when paying converted currency from a foreign bank and financial accounts.
Reducing Your United States Tax Bill
What can I do to reduce my US taxes?
Even if your taxes go beyond the abovementioned thresholds, chances are you won’t pay any Federal Income Tax.
Why is this?
You can claim some provisions the Internal Revenue Service has made. These provisions are specifically designed for expats and could be a zero figure.
In most instances, the tax obligation for expats is not higher than the higher income amount within the US. This also applies to their country of residence.
What Are Income Tax Treaties and How Do They Affect US Expats?
Income tax treaties occur when a tax treaty exists between the country of their residence and the US. These are to protect expats from paying double taxes.
Very few US expats enjoy tax treaties. The reason is that there is a “Savings Clause” included.
There are some exceptions when applying for treaty benefits. Expat services such as teachers, researchers, and students fall into this category. You need an 8833 Form to apply for a tax treaty provision.
When Do Taxation Rules Line Up?
According to the IRS, there are some rules for filing income that are the same.
The rules for filing estate, income, and gift tax returns and the payment of estimated taxes are usually the same. These apply to both citizens and resident aliens.
Claiming Tax Exclusions Abroad
Most Americans living overseas claim Foreign Earned Income Exclusion. They also claim Foreign Tax Credits.
Americans living abroad paying expat taxes may apply for US tax credits. This is equal to the value of foreign income taxes paid in their country of residence.
Foreign Tax Credits apply to expat taxes paid on foreign incomes. American rents, investments, and pensions are not exempt from eligibility criteria.
If you want to claim credits, you will need to file an IRS 1116 form when filing expat tax returns.
You still must file US tax returns if you do not owe any US taxes. You need to declare your worldwide income to the IRS.
Expats can also claim the Foreign Earned Income Exclusion to reduce or do away with Federal Taxes. This depends largely on their risk determination.
Saddock Advisory is Here to Help!
As an expat, you will find that filing your federal tax returns is a lot more complicated than filing from within the US. Our team of dedicated professionals at Saddock Advisory is here to assist.
The IRS is enforcing US tax filing globally. This is since FATCA (the Foreign Account Tax Compliance Act) came into effect. Exclusions and credits are considered if you have not claimed them. Expats need to ensure they remain compliant to avoid the US government revoking their passports.
Expats should seek professional help from a tax professional to ensure the timely filing of their taxes in 2022.
If you need a tax advisor to guide you this tax season, our expert team members are ready for your queries.
Get in touch with us today to make this tax season a breeze!