Foreign Earned Income | TaxConnections

24 May 2018

5 Things To Know About IRAs For U.S. Expats

As an American living and working abroad you better be fully armed with a knowledge regarding IRA for US expats, its’ opportunities and tax savings you can achieve. For example, do you know that depending on your foreign income you may or may not contribute to your regular or Roth IRA as an American abroad?

A lot of US expats qualify for the Foreign Earned Income Exclusion and they choose it to exclude the first $102,100 (as of the 2017 tax year) of foreign wages or self-employed income from the US federal income taxes. But not so many people know that if you are using the Foreign Earned Income Exclusion, then you signed yourself to its restrictions on your contributions to an IRA. Read further to find out more about it.

Written by Olivier Wagner | Posted in Expatriate • Expatriate Taxes • Foreign Earned Income • IRA • Roth IRA

18 May 2018

Will The IRS Find Your Foreign Bank Account?

Yes, eventually the IRS will find your foreign bank account. When they do, hopefully, your foreign bank accounts with balances over $10,000 have been reported annually to the IRS on an FBAR “foreign bank account report” (Form 114). And hopefully, interest and dividends from your foreign bank accounts will already be reported on your annual US tax return, including foreign disclosure forms and statements (Form 1040). When the IRS finds your foreign bank account and it has not been reported properly you are in a lot of trouble. Just Google FBAR penalties- nothing good comes up.

But I Don’t Owe Any Extra Taxes? I Live Overseas And Pay Tax Where I Live? My Exemption For Working overseas Eliminates Any US Tax Owed?

Read the articles you googled on FBAR penalties. Form 114 is a disclosure statement only, but some of the smaller penalties are $10,000 and 5% of your highest account balance. The penalties escalate from there to higher civil penalties and possible criminal penalties. You need to file an FBAR disclosure annually on your foreign bank account if the balance exceeded $10,000 on any day during the tax year.

Written by Aaron Giles | Posted in Foreign Earned Income • Foreign Income • IRS

11 May 2018

Filing Taxes As An American Living In Mexico – US Expatriate Taxes Explained

You are going to be required to file US expat taxes no matter in which country you live, but how will they be affected if you’ve chosen to live in Mexico? With the familiar language, proximity to the US, warm weather, and beautiful geography, Mexico is one of the most popular destinations for American expatriates. It is essential to understand how your US tax return will be affected by your move to Mexico, and what US taxes you will be required to pay. On top of your obligation to file and pay US taxes, Mexico has taxes of its own. Read on for the details you need! Read More

Written by David McKeegan | Posted in Expatriate Taxes • Foreign Earned Income • Mexico Tax/ Belize Tax

03 Apr 2018

Foreign Tax Credit For Individuals Living Abroad

As you know, the United States requires all citizens and permanent residents (Green Card holders) to report income via annual income tax filings regardless of where in the world the money was earned. As the name suggests, the Foreign Tax Credit for individuals is designed to reduce your U.S. tax burden on income that was earned and consequently taxed in a foreign country. In this way, you will not be subject to double taxation on that money.

In addition to foreign earned income (FEI), dividends, interest, and even rental income that come from foreign sources are eligible for consideration with the Foreign Tax Credit if they were taxed by a foreign entity. One benefit to using this credit is that it is available to all U.S. taxpayers who have foreign earned income or investment income from a foreign source. There are no stipulations regarding residency or time spent in a foreign country to take advantage of this reduction in taxes owed at home. Read More

Written by Olivier Wagner | Posted in Foreign Earned Income • Foreign Tax Credits • Tax Credit

26 Mar 2018

Form 2555: Keep More Of Your Foreign Earned Income As A U.S. Expatriate

Living and working abroad comes with many exciting benefits. In addition to exploring new lands and learning about new cultures, expats often earn additional income beyond just their regular salary. Foreign earned income can come in many forms. In addition to the wages that are earned, those who are working outside the United States also must declare as income bonuses, tips, commissions, and the like.

It is also common for expats working overseas to have non-cash income as part of their employment package.
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Written by Olivier Wagner | Posted in Foreign Earned Income

21 Mar 2018

How Does The Foreign Earned Income Exclusion Work?

It is also common for expats working overseas to have non-cash income as part of their employment package.

Written by Olivier Wagner | Posted in Foreign Earned Income • Foreign Earned Income Exclusion • TaxConnections

05 Dec 2017

What US Expats Who Receive Form W-9 from a Foreign Bank Should Do

Over the last few years, millions of US expats have been asked by their foreign banks and investment firms to fill out IRS form W-9. Receiving form W-9 often causes surprise or alarm. While there’s no need to panic, there are a number of things that expats should know if they receive form W-9, to ensure that they don’t create any problems in the future. Read More

Written by Hugo Lesser | Posted in Expatriate • FATCA • Foreign Earned Income • Foreign Entity

17 Nov 2017

Claiming the Foreign Earned Income Exclusion when Filing a Late Return – What US Expats Need to Know

The Foreign Earned Income Exclusion lets US expats exclude the first around $100,000 (the exact figure rises a little each year) of their earned income from US taxes.

It’s a great choice for many expats who earn less than this threshold, and sometimes a good option for expats who earn above the threshold too.

To claim the Foreign Earned Income Exclusion, expats have to file form 2555 with their annual US tax return. Form 2555 requires expats to prove that they live abroad.

Written by Hugo Lesser | Posted in Expatriate • Foreign Earned Income • International • IRS

20 Sep 2017

American Workers Abroad – How To Avoid Audit Risk On Form 2555

While Congress offers the foreign earned income exclusion (FEIE form 2555) and the foreign tax credit (FTC form 1116) to lighten the tax burden of American workers abroad, they don’t want it too light!

What Is The Revoked Exclusions Rule?

Each year a foreign worker can choose to between FEIE and FTC to pay the lowest amount of taxes. The revoked exclusion rule is designed to prevent taxpayers abroad from switching each year between FEIE and FTC. Simply put, if you had been using FEIE then switch to using FTC, then you are prohibited from switching back to use FEIE for a period of five years.

Sadly, retail tax software products offer the choice without communicating the consequences for subsequent years. Also since the vast majority of domestic tax preparers never use form 2555, they are unaware also, of the implications of switching between the two. Revoked exclusions are, in my opinion, a senseless complexity designed to deprive foreign workers of flexibility and to entrap them in the complexity of the tax code. But it is the law. How can we protect ourselves? Let’s dissect what it means to revoke exclusion.
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Written by Kat Jennings | Posted in Foreign Earned Income