March 3, 2014
If you are a U.S. citizen or resident who lives or works abroad, you generally must file and pay your tax in the same way as people living in the U.S.A. This includes people with dual citizenship.
Here are five tips U.S. taxpayers with foreign income should know for their income tax returns:
1. Report Worldwide Income.
The law requires U.S. citizens and resident aliens to report any worldwide income. This includes income from foreign trusts, and foreign bank and securities accounts.
2. File Required Tax Forms.
In most cases, affected taxpayers need to file Schedule B, Interest and Ordinary Dividends, with their tax returns. Some taxpayers may need to file additional forms. For example, some may need to file Form 8938, Statement of Specified Foreign Financial Assets, while others may need to e-file FinCEN From 114, Report of Foreign Bank and Financial Accounts (a.k.a. FBAR), with the Treasury Department.
3. Consider the Automatic Extension.
U.S. citizens and resident aliens living abroad on April 15 qualify for an automatic two-month extension to file their federal income tax returns for the year before.
4. Review the Foreign Earned Income Exclusion.
Many Americans who live and work abroad qualify for the foreign earned income exclusion. This means taxpayers who qualify will not pay taxes on up to $99,200 of their wages and other foreign earned income they receive in 2014, and $97,600 for 2013.
5. Don’t Overlook Credits and Deductions.
Taxpayers may be able to take either a credit or a deduction for income taxes paid to a foreign country. This benefit reduces the taxes these taxpayers pay in situations where both the U.S. and another country tax the same income.
Additional IRS Resources:
- Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
- Report of Foreign Bank and Financial Accounts (FBAR)
- Publication 4261, Do You Have a Foreign Financial Account?
- Form 8938, Statement of Specified Foreign Financial Assets
- Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts
- Form 2555, Foreign Earned Income
- Form 2555-EZ, Foreign Earned Income Exclusion
- International IRS offices