U.S. citizens living abroad still need to file their taxes with the federal government. Often times this can be forgotten in the flurry of big life changes like relocating and settling into a life in a foreign country. Since Congress passed the Fast Act in 2015, many of our clients have a genuine concern that without resolving their looming tax issues they may face the revocation or denial of renewal of their passport. Other clients are interested in renunciation of their citizenship or are in the process of helping a loved one gain citizenship. These issues too can be affected by unfiled returns and back taxes.
WATAX has 30 plus years of helping U.S. citizens around the globe get back into compliance with the IRS, in the simplest, least expensive way. Here's our handy list of steps you can act upon to resolve your back tax issues before they become even bigger concerns.
- First, find out when the last year you filed was and determine what years you should file to establish "compliance." Six years is considered "compliant" but some people file less than that and see if that satisfies the "system."
- Find out If you qualify for the Foreign Earned Income Exclusion (FEIE) which exempts income up to $112,000 from U.S. taxation (in 2022). If you are over $112,000, you might also further reduce your exposure to taxes by using the Foreign Tax Credit (FTC) which gives you credit for any foreign taxes paid.
- If you are self-employed and working abroad, you will be required to pay social security taxes UNLESS YOU are participating in a country that has an equivalent Social Security system (most first world countries).
- Report any money held in foreign financial accounts exceeding $10k with a Foreign Bank Account Report (FBAR). If you haven't filed in several years, start filing asap if you want to avoid ending up like this guy!!
- Concerned about owing taxes? No problem. Livable payment agreements or settlements are available to mitigate the damage.