If you live or work outside the United States, generally your taxes must be filed and paid for the same as a taxpayer living inside the U.S. This includes people with dual citizenship. There are also the Taxpayers with foreign accounts that exceed certain thresholds that are required to file form FinCen114, this form is also known as “FBAR,” Form 8938, and “FATCA.”
Important: Even though FBAR is not a tax form it must still be electronically filed by the April 17 deadline through the BSA e-filing system. An extension until October 15 could be granted.
1. Report Worldwide Income. Americans living abroad, and many non-U.S. citizens, are required by law to file a U.S. income tax return and report any worldwide income. Key benefits like the foreign earned income exclusion are only available to those who file returns.
2. Report Foreign Accounts and Assets.S. Citizens and resident aliens are required by federal law to report worldwide income, including accounts and trusts in foreign banks.
3. File Required Tax Forms. Taxpayers need to file Schedule B form, also called Interest and Ordinary Dividends. Part III of the Schedule B asks about the existence of foreign accounts, like bank and security accounts, the form also requires the locations of these accounts to be disclosed.
Some taxpayers might be required to file additional forms to the Treasury Department, forms like Form 8938, Statement of Specified Foreign Financial Assets, or FinCEN Form 14, Report of Foreign Bank and Financial Accounts (FBAR).
- FBAR for holders of Foreign Accounts with an aggregate value exceeding $10,000 at any time during the 2017 tax year, taxpayer must file a Treasury Department FinCEN Form 114.
- Form 8938 for U.S. citizens, residents and certain nonresident aliens must report foreign financial assets on this form. If the total value is at or below $50,000 at the end of the tax year, there is no need to file, unless the amount is more than $75,000.
4. Review the Foreign Earned Income Exclusion. The foreign earned income exclusion is available to many Americans who live and work abroad when they file their taxes. Meaning that many will not have to pay taxes on up to $102,100 of wages and other foreign earned income they received in 2017.
5. Don’t Overlook Credits and Deductions. A taxpayer may be able to take either a credit or a deduction for any income tax paid to foreign country. The benefit reduces the amount to be paid by the taxpayer when both the U.S. and another country tax the same income. However, Child Tax Credit cannot be claimed if you file Form 2555, Foreign Earned Income or 2555-EZ Foreign Earned Income Exclusion.
6. Automatic Extension. U.S. citizens and Resident Aliens living abroad on the April 17, 2018 are qualified for a automatic extension until June 15, to file their 2017 federal tax returns. Extension of time to file applies to those serving in the military outside of the U.S., and a statement must be attached to returns explaining the reason they qualify for extension.
7. Additional Extension of time to File. U.S citizens and resident aliens may also qualify for an addition extension until October 15, 2018, by filing Form 4868, Application for Automatic Extension of Time File U.S. Individual Income Tax Return. However, this form must be filed and all taxes paid by April 17, 2018 or taxpayer will be subject to late payment penalty fees.