How to File Your Taxes Abroad: Financial Solutions for Expat Life | Expat Empire
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Tax Day is approaching and many expats around the world are starting to feel anxious about dealing with their complicated local and international tax filing obligations. If you lived abroad in a single country for more than half of the previous year and had a taxable income, then you are likely required to file your local tax return. Not only do US citizens and permanent residents have the obligation to settle up with the government in their country of residence, but every US citizen and Green Card holder is obligated to file their United States tax return every year as well, even if they didn’t earn income in the US. Filing taxes in two countries, two tax systems, and possibly even two languages can be a frustrating and daunting experience, so in this blog post we’re hoping to provide some insight into the process and ease some of the stress you’re likely feeling.
While some expat tax stories are far more complicated than others in the first year, most expats have streamlined the process for themselves by the second time around. Often, this comes with the assistance of seasoned professionals who specialize in helping the large US expat population around the globe. For relatively simple US tax situations, we recommend MyExpatTaxes. More complex US tax situations would benefit from the individual help of an accountant versed in the complicated details of international tax law through a company such as Online Taxman. For local taxes and other expat tax advice, we have some other options in mind, so keep reading!
Foreign Obligations: Staying On Top of Your Local Taxes
If you stay in a single country for more than 183 days (roughly 6 months) or have permanent residency in a country in the previous calendar year, you are likely obligated to settle up with the government just like you did back in your home country. If you made income abroad during that time, you must complete the necessary tax forms. You may even be obligated to report any income you made worldwide, even income made in other countries. Not doing so will likely jeopardize your future visa or residency situation and even cause your current visa or residency to be canceled if the issue drags on long enough. Simply put, it’s smart to make sure you stay on top of your tax situation in the country you live in.
You may be working for a local company and paying income tax from each paycheck automatically. Even if that’s your only form of income, we still advise that you consult a local tax professional for practical reasons. This will help your case for remaining a resident and, if you so please, eventually applying for citizenship. Furthermore, you may even be entitled to benefits that you weren’t aware of before such as additional deductions or reimbursements that will reduce your tax bill. Meanwhile, some countries have special tax regimes for foreign residents and non-residents, so checking the right boxes on the necessary forms on your local tax return could easily save you thousands of your hard-earned dollars.
Pulling Double Duty: Tax Filing Requirements of US Citizens and Green Card Holders Abroad
US citizens and permanent residents abroad might feel some security knowing that they are always tethered in some way back to the resources of the United States government, but that comforting feeling rarely manifests during tax season. It doesn’t matter how much time you spent in the US during the last tax year. Even if you flew back for a week so you could attend a wedding and didn’t make any US income during that time; even if you haven’t set foot in the US for 5, 10, or 20 years; even if you’re already paying taxes in one or two other countries for that year, every US citizen and permanent resident is required to file their taxes every single year.
While that is certainly not the most enjoyable part of being a US citizen, the good news is that there are many income exclusions and tax advantages that you can use as a long-term expat to reduce or eliminate your US tax bill. If you qualify for the bona fide residence or physical presence test, then you will be able to use the Foreign Earned Income Exclusion (FEIE) to exclude up to $108,700 in income received from abroad from US taxes (this number reflects the 2021 figure, which increases annually at the rate of inflation). Furthermore, if you pay taxes in a foreign country, such as the one where you have tax residence, then you can also apply those tax payments as Foreign Tax Credits to reduce your US tax bill. Additional benefits such as the Foreign Housing Deduction can help high-earners to further decrease the amount they owe to Uncle Sam.
Managing Taxes Abroad: Financial Solutions for Your Expat Life
As always, we at Expat Empire want to provide ways to simplify your expat life through technology. Starting with the topic of local taxes, there are a few promising options available to you. One notable online tax filing company, Taxfix, is currently available to assist tax residents of Germany, France, and Italy in filing local taxes and is quickly expanding to other countries in the European Union. Taxfix provides a low-cost English language app-based interface that can help you quickly and easily file your taxes in those countries.
For expats residing in other countries, we recommend hiring a local tax accountant that can manage the entire tax filing process on your behalf. They will make sure you take advantage of all the opportunities available to you and keep you on the good side of the local tax authorities. Expat Empire would love to connect you with a local tax consultant in your country through our global partner network. Please let us know more specifically what help you are looking for in our Partner Contact Form and we’ll put you in touch with a talented foreign tax accountant as soon as possible.
Next, since US citizens and Green Card holders aren’t exempt from filing taxes in the United States, we have a couple of great recommendations for you. If you have a fairly straightforward tax situation, MyExpatTaxes can be a good option. They provide an easy-to-use web interface where you can upload your tax documents and input the necessary information to complete your US tax return as an American abroad. At only €149 for their basic service, it’s one of the most affordable options on the market and well worth the cost for the peace of mind they will provide you.
For those with more complicated tax situations, we recommend working with Online Taxman. They specialize in helping US citizens abroad file their taxes through a more hands-on approach by assigning a dedicated accountant to each of their clients. As a special gift to Expat Empire readers, they have offered to waive their usual $69 consultation fee and connect you immediately with one of their skilled professionals! Just fill out our short contact form to take advantage of this amazing opportunity!
While there’s no guarantee that your taxes will be as uncomplicated as they might have been in your origin country, you should know that they’re simply a bump in the road to achieving your fulfilling life abroad. Once you’ve been through the process of filing taxes after your first year abroad, you’ll feel much more comfortable and confident in your own finances.
Tell Your Story!
Have you had any painful experiences with filing taxes both in the US and abroad? Know any good companies that help with filing taxes in either of your countries? Want to leave some tips for fellow expats and travelers? Leave a comment on this post below. If you’d like to share your story about travel struggles and accomplishments, write it up and get it featured on our blog!
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Originally published at https://expatempire.com on March 31, 2021.
