Small Office Home Office (SOHO) Tax Tips

Tax Tips for US Taxpayers Living Abroad

Jun 26, 2011 Federal Tax Return, Income Tax

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Tax tips for US taxpayers living abroad are always useful. The America.gov Archive website is no longer updated but still provides important recommendations for both US citizens who live abroad and resident aliens. In summary, regardless of what kind of financial information you file (for example, income tax returns, estate returns, or gift tax returns), the filing rules are the same whether you live in the continental US or abroad. The rules also include paying any estimated taxes.

What are important filing deadlines?

Personal income tax returns (namely, IRS Form 1040, 1040a, or 1040EZ) are generally due in the middle of the fourth month (April 15) that follows the end of a calendar year.

Income tax filing rules are basically the same for US Taxpayers living abroad.

For those who are living overseas or are serving in the military outside the US and Puerto Rico (but not a combat zone) , there is an automatic two month filing extension.  It is important to remember that this two-month extension or the six month filing extension (IRS Form 4868, Application for Automatic Extension of Time to File US Individual Tax Return) is for the filing of a return; any taxes that are owed the government must be paid by the original filing deadline.

Any filing extension for US Taxpayers living abroad apply only to filing the return; pay any tax balance due by the original return deadline.

Your failure to address payment of any tax balance due by the original return deadline leaves you subject to paying interest as well as possible penalties.   Your tax payments are considered paid when the IRS receives the funds rather than when you postmark your your balance due, a separate voucher, or estimated tax payment.

What about difference in Exchange Rates?

All income reported on US federal or state income tax returns are stated in US dollars (USD) rounded up (or down) to the nearest whole dollar. While a taxpayer can use a daily currency exchange rate for very specific financial transactions, taxpayers reporting income should reference the yearly average exchange rate. If you find yourself filing income tax returns for prior years and are unable to determine an annual average, consider reseaching the exchange rate as of December 31 of the tax year you are reporting.  You can find further information about exchange rates by searching for “exchange rates” in the Search feature available on the official IRS website, irs.gov.

Do you have a taxpayer identification number ?

You need a taxpayer identification number to file a personal income tax return. Most US taxpayers have a Social Security number (SSN). You also need identification, typically a SSN, for any people who are claimed as joint filer or dependent on a US income tax return. If a spouse or dependent does not have a SSN, you need to provide an Individual Taxpayer Identification Number (ITIN).  You need original or certified documentation proving identify, age, and citizenship when applying for an SSN at a local US Social Security office or, if abroad, at a US consulate.  The IRS issues ITINs used exclusively for filing financial information with the federal government. Use IRS Form W-7, Application for IRS Individual Taxpayer Identification Number,  when applying for an ITIN for a spouse or dependent.

More help for US taxpayers living abroad?

On the official IRS website, www.irs.gov, click the Individuals tab on the left side of the main menu.  In the submenu, click International Taxpayers.  You will open a webpage with many IRS references to various topics that assist the US taxpayer living abroad.  If you are living abroad, consider seeking assistance from a tax professional before you file your income tax return.

 

 

Tags: Individual Taxpayer ID Number, Resident Alien, Social Security Number, W-7