US Expatriate Tax Returns and Filing Requirements for Americans Abroad

By ZM Ishmurzina

More Americans living abroad realize that they have to file US expatriate tax returns. FBARs, FATCA global reach and the Department of Justice investigation of foreign banks have spread fears among American expats across the globe. There is a lot of confusion about the filing requirements.

The key misconception is due to a set of tax requirements in a host country. Americans living abroad assume that if they diligently file a tax return in a foreign country and pay local income tax, they don’t owe any U.S. taxes and should not file a U.S. tax return. This assumption is far from being correct.

US citizens are taxed on their worldwide income so American expatriates need to file a US overseas tax return even if they pay taxes in a foreign country.

This is the latest email from one of our clients. “I am a US citizen living abroad since 1998. I didn’t earn any income in all prior years because I am a homemaker who is married to a Swiss citizen. Last year I earned 5,000 euro providing some schooling services. I read some information about filing requirements but I am confused. Should I file US expatriate tax returns for all prior years?”

2014 Filing Requirements for American Expats Living Abroad

First, Americans living overseas are taxed on their worldwide income. Although, some Americans have left the USA a long time ago and don’t have any income from the USA, they are still required to file US expat tax returns.

Second, American expats have to file US expatriate tax returns if they meet the filing requirements based on the age, filing status and income.

Third, there are special circumstances that require American expatriates to file US expat tax returns.

  • Net self-employment income of $400 or more
  • Household employment taxes due
  • Alternative Minimum Tax due
  • Additional taxes on a retirement plan or health savings account
  • FICA taxes on unreported tip income
  • Earnings in the amount of $108.28 or more from a tax-exempt church or church-controlled organization
  • Distributions are received from an MSA or Health Savings Account
  • Requirement to repay some recapture taxes on US expat tax returns

Fourth, there is a misunderstanding among many Americans living overseas. They believe that they are not required US expatriate tax returns if their income is under the amount of foreign income exclusion. This assumption is incorrect. US expat tax returns must be filed in order to claim any exclusions, deductions or exemptions.

Fifth, per section 1 of the Internal Revenue Code you have to file if you meet filing requirements. Whether you must file your tax return depends on three factors: gross income, filing status and age.

For example, if you file Married Filing  Separately, you have to file a US overseas tax return if your gross income is $3,700. The source of this income can be wages, self-employment income, passive income like dividends, interest, rental income etc.  If you file as a Single, then you have to file a US overseas tax return if your gross income is $9,500.

2014 Filing Requirements for American Expats Living Abroad

Filing Status, Age, Minimum Income Requirement

Single 

Under 65                                   $10,150

65 or older                                $11,700

 

Head of Household

Under 65                                    $13,050

65 or older                                 $14,600

 

Married Filing Jointly

Under 65 (both spouses)       $20,300

65 or older (one spouse)        $21,500

65 or older (both spouses)    $22,700

 

Married Filing Separately

(Any age)                  $3,950

 

Qualifying Widow(er)

with Dependent Children

Under 65                                    $16,350

65 or older                                 $17,550

American expatriates who need help with US expat tax returns, FBARs, FATCA, PFIC and other overseas tax issues, must consult an expat tax CPA that provides international tax services. International tax experts at Artio Partners are here to help you.