Deadline to File for Taxpayers Abroad Rapidly Approaches

taxseason

If you live or work abroad, today (June 15) is the last day to file your federal income tax return for 2016. This includes those with dual citizenship. You can digitally request an extension if you can’t meet the deadline. The extension is granted to those who attach a statement explaining why they should be qualified – typically for those living or serving on the military outside the United States.

 

Do you need to file?

Filing obligations are linked to personal income such as wages, salary, commissions, tips, consultancy fees, pension fund, alimony, U.S. or foreign social security, interest, dividends, capital gains, rental property, farm income, royalties, inheritance or payment in kind in the US or abroad.

What are your options?

According to Publication 54 of the IRS, you don’t have to file on paper. “Electronic filing” is the fastest, easiest, and most convenient way to file your income tax return electronically.

Do so by using your personal computer, with the help of a volunteer or contact a tax professional who can do it for you. This would offer an accurate, safe, and fast alternative to filing on paper. IRS computers quickly and automatically check for errors or other missing information.

You can reduce your US tax by a substantial amount through two methods: “Foreign Earned Income Exclusion” or “Foreign Tax Credit.” None of them excuse you from filing if your income was above the filing threshold.

What information do you need?

The requirements for determining who must pay estimated tax are the same for a U.S. citizen or resident abroad as for a taxpayer in the United States. For current instructions on making estimated tax payments, see Form 1040-ES.

If you had a tax liability for 2016, you may have to pay estimated tax for 2017. Generally, you must make estimated tax payments for 2017 if you expect to owe at least $1,000 in tax for 2017 after subtracting your withholding and credits and you expect your withholding and credits to be less than the smaller of: 1. 90% of the tax to be shown on your 2017 tax return, or 2. 100% of the tax shown on your 2016 tax return. (The return must cover all 12 months.)

If less than two-thirds of your gross income for 2016 and 2017 is from farming or fishing and your adjusted gross income for 2016 is more than $150,000 ($75,000 if you are married and file separately), substitute 110% for 100% in (2). See Pub. 505 for more information.

Now what?

It’s not too late to figure it out – make sure to request an extension, even if you just need more time to do research. Make sure your numbers are in order and all information is accurate prior to filing.

If you need help choosing a software provider, go here.