Navigating US Taxes When You Have Foreign Income

Living abroad? Great! But remember, your tax obligations don’t vanish. Uncle Sam still wants his cut, regardless of where you earn your income.

This post outlines the key changes the IRS has made for reporting foreign income, helping you avoid those “pretty stiff penalties” they mentioned.

Reporting Your Worldwide Income:

  • As a US citizen or resident alien, you’re required to report all your income, worldwide, including foreign bank accounts and investments.
  • Deadlines: Generally, file your US tax return by April 15th (June 15th if living abroad).

Forms You May Need:

  • Schedule B: Report most foreign income from interest and dividends.
  • Form 8938: Disclose specified foreign financial assets exceeding certain thresholds.
  • Form TD F 90-22.1: Report specific foreign bank accounts (for some individuals).

Tax Relief Options:

  • Foreign Earned Income Exclusion: Exclude up to a certain amount of foreign earned income from US taxes.
  • Foreign Tax Credit or Deduction: Reduce your US tax bill for taxes you already paid to a foreign government.

Free Filing:

  • If your adjusted gross income is below this threshold you can use free tax software for filing electronically.

Need Help?

  • The IRS has staff in US embassies and consulates abroad to assist with tax filing. Also see their FAQ around foreign income taxes.
  • Consider hiring an accountant for complex returns or over $10,000 in foreign income.

Remember: Stay informed and proactive about your foreign income tax obligations.

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