Did you know that many lawyers out there enjoy music as much as many musicians out there? Of course, a professional musician will be more likely to buy something such as presonus notation, but I know and have heard of at least a few lawyers who play their electric guitars after a day at work and are very happy while doing so because it allows them to have a hobby that they can engage themselves into.
Monthly Archives: March 2016
All US citizens are required to file a US tax return, whether they are living in the US or living abroad. This applies to individuals who are working jobs located in the US or those who have foreign jobs for a foreign company. However, the US has several exclusions and exemptions that help reduce or eliminate the amount of taxes owed. In addition, there are other requirements such as the FBAR that every American living abroad needs to know.
Foreign Earned Income Exclusion
If you earn under about $100,000 while living abroad then you may qualify for a Foreign Earned Income Exclusion. This amount can reduce your income and therefore reduce the amount of taxes you owe. For those individual who are making less than $100,000 and have no other sources of income, this exclusion may reduce the amount on total income to zero, and therefore the taxpayer will owe no taxes. However, filing a tax return is still required every year.
Foreign Tax Credit
This is a dollar for dollar reduction in taxes owed based on the amount of taxes paid to a foreign country. If an individual pays more taxes to a foreign country than the individual would owe to the US, then the Foreign Tax Credit may help reduce the amount of taxes owed. This credit is most helpful fore individuals living in a high tax country such as the UK, Norway, or Sweden for example. And it may not be helpful for those individuals living in a low tax country such as Saudi Arabia or the Bahamas.
If you are living abroad then you usually do not need to file a state tax return. If however, you own a rental property or a business in any state while you are living abroad, then you likely need to file a state tax return.
If you have over $10,000 in aggregate in all your foreign financial accounts, such as bank accounts, securities accounts or pension accounts then you need to file an FBAR. The FBAR is due on June 30th, 2016 and the FBAR is filed with the US Department of Treasury, not the IRS. The Department of Treasury does not give extensions in 2016, however, in upcoming years the Department of Treasury plans to change the filing date and allow for extensions.
The Individual tax return, Form 1040, is due every April 15th. However, the IRS gives an extra extension until June 15th, for individuals living outside the country. In addition, there is an automatic extension available until October 15th, for those who file the correct forms before April 15th. All extensions allow more time to file the return, however, if taxes are due, then they must be paid by April 15th or penalties and interest will begin to accrue.
About the Author
Joshua Katz, CPA, is the founder of Universal Tax Professionals, an expat tax and accounting firm dedicated to the needs of Americans living abroad. Feel free to email Josh directly at [email protected].