United States citizens and resident aliens living abroad face a unique set of income tax responsibilities and opportunities. The same is true for resident aliens living in the U.S., citizens of foreign countries with income generated in the U.S, and U.S. citizens with significant assets located in foreign countries. Over my career, I’ve specialized in working with individuals overseas to help ensure they reach the most beneficial U.S. tax positions possible given the complex regulations they must adhere to.
Below are a few of the areas I specialize in when helping expatriates and foreign citizens with their U.S. income tax obligations.
Form 2555 – Foreign Earned Income Exclusion
If certain requirements are met, individuals are able to exclude from U.S. taxation up to $103,900 of income earned in a foreign country during 2018 via the Foreign Earned Income Exclusion. For example, a U.S. citizen working overseas may be able to exclude income earned from the foreign employment up to $103,900 on his or her U.S. tax return. Likewise, a resident alien of the U.S. living outside the U.S. may be able to exclude foreign-earned income up to that same amount on his or her 2018 U.S. income tax return. This reduces the possibility of the same income being taxed by two different countries.
Form 114 – Report of Foreign Bank and Financial Accounts (FBAR)
United States citizens, resident aliens, and business entities that have either a financial interest in or signature authority over foreign financial accounts exceeding $10,000 (U.S. dollars) in value at any time during the calendar year must file an FBAR to report those accounts with the Financial Crimes Enforcement Network. Any taxpayer required to file an FBAR who mistakenly fails to properly do so may be subject to a penalty of up to $10,000 per violation. On the other hand, any taxpayer required to file an FBAR who willfully fails to properly do so may be subject to a penalty of up to $100,000 or 50 percent of the account balance at the time of the violation.
Form 8938 – Statement of Specified Foreign Financial Assets
Certain U.S. citizens, resident aliens, and business entities that have an interest in certain foreign assets must attach Form 8938 to their tax return if those foreign assets exceed certain thresholds (in U.S. dollars) on both the last day of the tax year and at any point during the tax year. Taxpayers required to file Form 8938 that fail to do so may be subject to a penalty of up to $10,000, with additional penalties for continued failure-to-file reaching a maximum of $50,000.