Below you will find some of the most frequently asked questions relating to U.S. expatriate taxes and other U.S. tax related questions.

If you don’t find the answers to your questions, then click here to contact XPAT1040 .

Working With XPAT 1040

XPAT 1040 specializes in international tax filings for people all over the world and was created to serve the tax needs of the international taxpayer. Unlike other CPA firms, at XPAT 1040, you will be able to work one-on-one with a personal International Tax Expert throughout your tax filing process, year after year. In addition, XPAT 1040 has extensive experience and offers an affordable and simple process. We take great pride in providing you with the best tax services and advice.

At XPAT 1040, unlike other tax service providers, you will be assigned your own International Tax Specialist. They will be your point of contact and correspond with you throughout the tax filing process, year after year. At XPAT 1040, your International Tax Specialist will always be available to answer any of your questions relating to your tax filings.

At XPAT 1040, you can communicate with your International Tax Specialist via telephone, Skype, and/or email.

Once we have received all of your tax information, and you have completed our customer questionnaire, we will begin preparing your tax return. After the tax preparation is completed, we will share your draft tax return with you and will then issue an invoice. At this point, payment should be submitted via credit card or PayPal. Payment can be made through our site here: Pay My Bill

XPAT 1040 has licensed U.S. CPAs that will generally be able to resolve your tax issues with the Internal Revenue Service or State tax authority. We have a proven track record of timely resolving dealings with the IRS or State taxing agencies.

When you moved overseas, your source of income might have stayed the same, however the tax requirements might have changed. You never want to pay more taxes than required, and when you move overseas, you could benefit from the foreign earned income exclusion, foreign tax credits, or a totalization agreement. Additionally, foreign informational reports, such as FBAR, FATCA, or ownership in a foreign entity, could make your tax filings very complicated and if not completed or done properly, you could face severe penalties or criminal prosecution.

XPAT 1040’s Filing Process

At XPAT 1040, we value privacy and security. As a result, we try and ensure that we gather the necessary information to accurately complete your tax filings as securely and confidentially as possible. We will not email any sensitive document unless you permit us to. In addition, we use Dropbox and Google Drive’s secure sharing platforms to transmit and receive files.  For more information on the security of Dropbox and Google Drive, click on the following links: https://www.dropbox.com/en/help/27 , https://support.google.com/drive/answer/141702?hl=en .

We will create a shared folder for you, granting you permission to add and remove your files accordingly, thereby ensuring your security and privacy.

In order to prepare your tax return, your personal XPAT 1040 International Tax Specialist will provide you with our customer questionnaire, which needs to be completed. Based on your responses on the questionnaire, your Tax Specialist may request additional information. You will also need to send us your prior year’s federal and state tax return(s) and FBAR reports.

XPAT 1040’s tax filing process is a 4-step process:

Step 1: You will be assigned to a personal International Tax Specialist and will provide them with all your tax information, including the completed customer questionnaire.

Step 2: Your International Tax Specialist will begin working on your return and will provide a draft copy of your tax returns and reports within 5 (five) business days.

Step 3: You will receive a draft copy of your tax return, along with any electronic signature pages needed to be signed. You will also receive an invoice for services rendered which must be paid at this point in order to proceed to Step 4.

Step 4: You will share the signed electronic signature pages and we will submit your return for electronic filing. We will then share with you the electronic filing acceptance from the IRS.

At XPAT 1040, once we have received all of your tax information, we will have your draft returns ready for review within five (5) business days.

XPAT 1040 is a Florida corporation. Being a U.S. corporation, we  do not charge nor collect VAT or Sales Tax.

U.S. Citizens / Residents

Congratulations and good luck, you will be joining the U.S. expat community abroad. As a U.S. citizen living overseas, it is extremely important to inform your current tax adviser that you will be relocating overseas. If they are not fully aware or versed in international tax issues, you might want to contact XPAT 1040 to speak to one of our International Tax Specialists.

As an expat, you can benefit from the foreign earned income exclusion, housing deduction, foreign tax credits and other benefits. Additionally, you will want to make sure you are disclosing all your foreign financial interests and assets if you are over the reporting threshold.

If you have maintained assets overseas, you will want to make sure you have been disclosing these assets from the beginning, if over the reporting threshold. This includes reporting any income that could be related to these assets. Please speak to one of our International Tax Specialists to find out more information.

A U.S. citizen living overseas, whether employed or self-employed, must file annual tax returns. U.S. citizens/residents are taxed on their worldwide income, and living in Johannesburg has the same federal tax implications as living back in Kentucky. Despite this, the foreign earned income exclusion, foreign housing deduction, foreign tax credit, and totalizations agreements could benefit your tax situation and possibly reduce your tax bill to $0.  Additionally, disclosing foreign interests and foreign assets could be a requirement.

A Social Security agreement, also known as a Totalization agreement, is an agreement between two foreign governments that define the terms of who is covered under which country’s social security system. Typically, when one gets relocated for work to a different country, their current employer and employee must still pay social security taxes in the prior country as well as the current country of residence. This could result in double taxation. The U.S. government entered into an agreement with 30 different countries in order to prevent this scenario of double taxation. U.S. self-employed persons can also benefit from a totalization agreement, thereby eliminating self-employment taxes (SE Tax). Please speak to one of our International Tax Specialists to find out more information.

If you are married to a non-U.S. Citizen, your tax return could be complicated. You have a range of filing statuses that could be used to benefit your tax situation. Please speak to one of our International Tax Specialists to find out more information.

If you will be living overseas and collecting U.S. Social Security, depending on the country of residence will dictate whether or not a tax treaty is present, exempting your social security earnings from tax. Please speak to one of our International Tax Specialists to find out more information.

FBAR stands for Foreign Bank Account Reporting. This has been a hot topic due to the fact the IRS passed FATCA and is aggressively pursuing  overseas taxpayers. A FBAR must be filed if a United States person has a financial interest in, or signature authority over foreign financial accounts, if, the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. A FBAR report is a separate informational report from your tax return, and must be submitted by April 15th, and an automatic 6 month extension is available now. Please speak to one of our International Tax Specialists to find out more information.

FATCA is an acronym for Foreign Account Tax Compliance Act. The law was passed under the Obama administration and this introduced form 8938. Form 8938 is similar to the FBAR in that you must disclose all of your foreign financial assets, with the exception that this the form is included in your tax return, has a higher reporting threshold depending on your filing status, and discloses additional foreign interest that the FBAR is not required to disclose. Please speak to one of our International Tax Specialists to find out more information.

If you are a U.S. citizen/resident, you are taxed on your worldwide income. Based on this, you must, therefore, report all your income from renting out all of your properties. However, you are entitled to claim rental deductions against your rental income, to arrive at a net taxable income. In fact, if the country in which the property is situated also taxes the rental income, you will be able to claim a foreign tax credit, lowering or making your federal tax liability $0. Lastly, you could be subject to an additional 3.8% tax on your net investment income depending on your income levels. Please speak to one of our International Tax Specialists to find out more information.

The first part to qualifying for the foreign earned income exclusion is to have a tax home overseas. A tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or a self-employed individual. Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. After your tax home is established, the second part is either meeting the requirements of the Bona Fide Residence Test or the Physical Presence Test. A U.S. citizen is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1–December 31).  A U.S. citizen or resident alien meets the Physical Presence Test when they are physically present in a foreign country, or countries, for at least 330 full days during any period of 12 months in a row. A full day means the 24-hour period that starts at midnight.

If you are living overseas and qualify to claim the foreign earned income exclusion, but your income is higher than the exclusion, you could potentially face a tax bill. If you live in a country that has higher tax rates than the U.S., you generally will have nothing to worry about. If you do not live in a country that has higher tax rates than the U.S., sending in tax estimates will be a great idea as well as contacting one of our International Tax Specialists to do some tax planning. In any event, the potential U.S. tax rate is determined if you would have not taken the exclusion.

If you live overseas, you will receive an automatic two-month extension, extending the tax deadline from April 15th to June 15th. If the 15th falls out on the weekend, then the deadline gets postponed to the closest business day, generally Monday. In addition to the automatic two month extension, a 4 month and/or 6 month extension is available, extending to October 15th or as late as December 15th.

If you are a corporate officer or a shareholder of a non-U.S. corporation, and have acquired a 10% or more interest in the foreign corporation during the current year, you could have an annual filing obligation disclosing your interest on form 5471, Return of U.S. Persons with Respect To Certain Foreign Corporations. Additionally, if you become a U.S. person during the year, and have an interest in a foreign corporation, you potentially might need to disclose your interest. Lastly, if more than 50% of the foreign corporation is owned by U.S. persons, making the foreign corporation a controlled foreign corporation (CFC), please contact one of our International Tax Specialists as these are very complicated areas. Other informational reports may be required as well.

If you are a partner in a non-U.S. partnership, you may have to file form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships. Other foreign informational reports could apply. Please contact one of our International Tax Specialists as these are very complicated areas.

Owning a non-U.S. mutual fund could put your asset under a very unfavorable code section, classifying it as a Passive Foreign Investment Company (PFIC). If it is indeed a PFIC, then form 8621 needs to be filed with your tax return. The tax treatment of PFIC can vary, but if no election is made, it can be disastrous for the owner. Please contact one of our International Tax Specialists as these are very complicated areas.

If you have inherited foreign assets from a non-U.S. resident’s estate, depending on the assets, you could have multiple foreign reporting requirements, such as FBARs, 8938, 3520, 5471, 8865, 8858, etc. Please contact one of our International Tax Specialists as these are very complicated areas.

Obamacare was a new tax law that went into effect in 2014, mandating that U.S. persons are required to have health insurance, unless an exemption applies. If you and your family live overseas, and qualify as bona fide residents or meet the Physical Presence Test under IRC section 911, an exemption does apply to you and your entire household, exempting your family from the mandated health insurance. If you do not meet the overseas exemption requirement, other exemptions do apply, but should be consulted with our International Tax Specialists.

U.S. Citizens/Residents Delinquent in Filing Taxes

This is an all too common situation, and thankfully, we have an answer. First, the law states that U.S. citizens/residents are required to report on their worldwide income. Second, if you have not yet reported, now is an excellent time to begin. The IRS is currently offering very favorable programs waiving all penalties, such as the Offshore Streamlined Program, for delinquent taxpayers, to bring them back into compliance. This program requires the applicant to complete the past 3 years of tax returns and 6 years of FBAR reports.

Some U.S. citizens move overseas and stop filing their U.S. taxes or never file a FBAR report. This is a very common occurrence, and the IRS wants you to get back into compliance, as it’s the law. Currently, the IRS is offering extremely favorable late filing tax programs that waive ALL penalties for late filings of tax returns and FBAR reports. XPAT 1040 specialize in these filings and stands ready to service you. Please contact one of our International Tax Specialists today to find out more information.

The United States government, as well as many foreign governments, passed legislation to prevent money laundering and funds making their way to the wrong people. The result; FATCA. For U.S. citizens/residents, this most likely means that your financial institution is participating in this program, and is now requiring you to complete the W9 form. The W9 form has all of your tax information on it, and will be provided to the IRS for reporting purposes. This essentially means the IRS will know about you and your overseas account(s). If you were not tax compliant in the past, it is essential that you become tax compliant now. XPAT 1040 specializes in international tax filings and will be glad to assist you in this process.

This is a serious situation and could warrant a filing under the OVDP process. The answer to this question depends on the type of account, how the money was generated, and whether it is corporate or individually owned. The OVDP process does carry with it penalties, however, it does eliminate criminal prosecution. Please contact your XPAT 1040 specialist for more information.

The Offshore Streamlined Process requires individual U.S. citizens, lawful permanent residents, or estates of U.S. citizens, to meet the applicable non-residency requirement. That is, if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days. Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States, nor maintenance of a dwelling in the United States by an individual, necessarily mean that the individual’s abode is in the United States. U.S. taxpayers eligible to use the Streamlined Foreign Offshore Procedures must:

(1) For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, file delinquent or amended tax returns, together with all required information returns (e.g. Forms 3520, 5471, and 8938) and;

(2) For each of the most recent 6 years for which the FBAR due date has passed, file any delinquent FBARs (FinCEN Form 114, previously Form TD F 90-22.1).

The full amount of the tax and interest due, in connection with these filings, must be remitted with the delinquent or amended returns. A taxpayer who is eligible to use these Streamlined Foreign Offshore procedures and who complies with all of the instructions outlined above, will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.  Even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy-related penalties, with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original tax noncompliance was fraudulent and/or that the FBAR violation was willful.  Any previously assessed penalties with respect to those years, however, will not be abated.  Further, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency. Please contact your XPAT 1040 specialist for more information.

The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and to pay all tax due in respect of those assets.  OVDP is designed to provide taxpayers with such exposure: (1) protection from criminal liability and (2) terms for resolving their civil tax and penalty obligations. The OVDP program requires 8 years of tax returns and FBAR reports to be completed and carries with it a 27.5% penalty or 50% on the highest year’s aggregate value during the covered period, covered by the voluntary disclosure.

We never recommend to simply not file your tax returns and the worst-case scenario is jail time and hefty penalties. The IRS rolled out fantastic programs to get into tax compliance, and we heavily encourage people to utilize these programs. Please contact one of our International Tax Specialists today to find out more information.

Nonresident Aliens (NRA) Investing/Working/Studying in the States

Good luck on the new investment and yes, you will need to file a Federal tax return, form 1040NR, and possibly state or multiple state tax returns. You will be receiving an information tax form, called a K-1, from the U.S. partnership. This form summarizes the activity as well as your investment into the partnership, and it is used to prepare your annual tax return. You will also need an Individual Tax Identification Number, also known as an ITIN, for tax reporting purposes. XPAT 1040 can assist you with all of these filings.

Yes. You will need to file a federal nonresident alien tax form called Form 1040NR as well in any state or states where your rental property is located. It is very important that nonresidents make special tax elections when owning rental real estate in the United States, as beneficial tax treatment can affect how much tax could be paid. Also, there are U.S. estate tax issues for nonresident aliens invested into the United States that should be considered. Please contact one of our International Tax Specialists today to find out more information.

If you were admitted into the United States on a F-1 visa to study, you are considered an exempt individual. An exempt individual, even though physically present in the United States, is considered to be not physically present in the United States. The student can take advantage of this status and claim it for a maximum of five (5) years. During this period, the student is deemed a nonresident and is only taxed on their income effectively connected to the United States. Additionally, the student is exempt from social security and medicare taxes being withheld from their paycheck if they are working and the work is through the University or related to their studies.

Welcome to the United States! Since you were transferred and are working in the States, you will have to file a tax return. The type of tax return will vary based on the numbers days you were physically present in the States during the calendar year. Three (3) filing options could apply:

  1. You could be considered a nonresident, being physically present in the states less than 183 days during the year.
  2. You could be considered a dual-status resident.
  3. You could be considered a full-year resident.

Under options 2 & 3, you must disclose all of your foreign financial assets. Please contact XPAT 1040 as we specialize in foreign nationals being relocated to the United States for employment.

If you do not find an answer here, please contact us at: [email protected] or 1.844.EXPAT-US (1.844.397.2887) or UK +44.20.3769.5241