Spring cleaning: Annual duties of an expat
Leaving your home country and moving abroad does not mean leaving all your real-world responsibilities behind; they follow you. Credit card bills, loans, taxes, and other loose ends that aren't tied up before you leave will sit and wait for you to return. Managing these duties from the other side of the world is doable thanks to modern technology. Each month, year, or every few weeks, I have to sit down and make sure I am on top of these obligations.
Yes, I am one of the 44 million Americans with student loan debt. There's no way around it: It sucks. But I am fortunate to be able to chip away at it each month thanks to a small amount of writing income that I receive in the United States. No matter what your income or your plans for the future, try to dedicate at least a small amount to these beasts of burden, or at least to monthly interest payments. While it may not seem like there's an end in sight (if ever), any payment is better than no payment at all.
When I packed up and moved halfway around the world to Cambodia, I admit, I used a credit card to purchase my one-way ticket from D.C. to Phnom Penh. I continue to use my card, but only the one with no foreign transaction fees. This lets me collect loyalty program points while living abroad and I make sure to pay the balance every month.
Since I still receive a quarterly paycheck in the States, I have to file taxes there, as well as in the country where I currently reside. I employ the assistance of an accounting company that specializes in expat tax filing, and this year I used Taxes for Expats. Their easy-to-complete forms prompt expats to enter income--both in the States and abroad--as well as all expenses such as rent and utilites. Expats can consult the foreign earned income exclusion statute, which dictates whether they need to pay taxes in their home countries.
Before filing with Taxes for Expats, I spoke with Lusine Kane (Product Evangelist for Taxes for Expats) who addressed these common questions about filing from abroad.
What should expats know about taxes before moving abroad?
As an expat, you will qualify for certain exclusions and credits regarding your taxes in the United States. It is important to know how your state handles expat matters and then adjust your plan accordingly. For expats, the deadline to file is June 15. This is to allow for any paperwork delays that might occur as a result of your country’s differing schedule. An extension can be requested to file through October 15.
How do expats know if they need to file taxes?
When living and working overseas as an expat, you are still required to file a U.S. tax return. Any income you earn through U.S. investments, rental properties, etc., will be taxed just as if you were living in the U.S. Income earned on foreign soil is taxed differently. The Foreign Earned Income Exclusion allows expats to exclude a large amount ($102,300) of income earned on foreign soil.
Why should expats use an accounting service instead of trying to file on their own?
The U.S. tax code changes every year, especially when there are major changes in the political landscape. If you are not a tax professional you probably do not have the time or inclination to keep up with all of these changes. Commercial tax programs are designed for taxpayers living in the U.S., not U.S. citizens living abroad. As such they are very likely to miss exclusions and deductions that are only available to expats.
What about expats who haven't paid taxes or filed for multiple years? How can they get started?
If you are not currently up to date on your tax returns or FBARs, the best option to become compliant is the Streamlined Procedure announced by the IRS in 2014. It requires filing of last 3 years of tax returns and 6 years of FBAR (regardless of how many years the taxpayer has missed). Any penalties that you might be liable to pay for failure to declare foreign bank accounts will be waived.
What other advice can you offer expats who are facing tax prep for the first time?
Be aware of deadlines and have good communication with your tax advisors to make sure you understand your filing requirements. There are forms that you likely have never had to file before--such as the FBAR (FinCEN114)--that have their own deadlines.
If you live/have lived abroad, what other responsibilities do you have to keep track of after you move to another country? Please comment below!