Category: expats

Eligibility for the Streamlined Foreign Offshore Procedures

The following excerpt is taken from the IRS website.

“In addition to having to meet general eligibility…, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Foreign Offshore Procedures described in this section must:  (1) meet the applicable non-residency requirement described below (for joint return filers, both spouses must meet the applicable non-residency requirement described below) and (2) have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and such failures resulted from non-willful conduct.  Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”

Qualifying for the Foreign Earned Income Exclusion using the bona fide or physical presence tests can be a tricky , especially for expats who just moved overseas. Some expats are better off taking the Foreign Tax Credit (Form 1116) instead of the exclusion on Form 2555. However, once you start using one method, you cannot switch to the other method without first asking the IRS’ permission to change your accounting methods. You may want to consult with a tax professional who has experience in preparing expat tax returns.

 

I just finished reading a great blog post — ‘The ultimate list of freelance tax deductions’.* When all is said and done, there isn’t much difference between freelancers and self-employed persons. For American expatriates, however, there are several rules to be aware of.

First and foremost, if you’ve earned $400 or more in 2014, you’ll need to report and file a 1040 tax return to the U.S. government. (This is an annual obligation that does not go away, regardless of the fact that you live abroad, and regardless of the number of years.)

Second, there is an exception to the housing deduction — it applies only to amounts paid for with self-employment earnings. If you do not have self-employment income, you cannot take the foreign housing deduction.

http://www.freelancersunion.org/blog/2015/01/28/ultimate-list-freelancer-tax-deductions/