![]() Furthermore, foreign financial institutions are required to report American clients’ information to the US government, so it’s important to get caught up and stay compliant if you haven’t already done so. For those abroad, the minimum reporting threshold starts at $200,000 for expats, but it can vary in some circumstances (find out everything expats need to know about FATCA).īe warned: Penalties for individuals who fail to file this form, if necessary, can be steep (up to $10,000 per year for a maximum of $50,000). FATCA requires Americans to report significant foreign financial assets on IRS Form 8938 each year. The Foreign Account Tax Compliance Act ( FATCA), signed into law in 2010, helps the US prevent tax evasion for people using foreign accounts. If you have control or signatory authority over any other account, such as a joint or business account, you must report those as well - even if they aren’t in your own name.įBARs for the 2022 tax year are nominally due by April 18, 2023, but there’s currently an automatic extension until October 16, 2023. Qualifying financial accounts include checking, savings, investment, and pension accounts (most of the time). US taxpayers who have accumulated $10,000 or more (in total) across qualifying foreign financial accounts at any time in 2022 must report them through FinCEN form 114. ![]() Foreign accountsīeyond reporting your worldwide income, you may also need to report your foreign account holdings via a Foreign Bank Account Report, or FBAR. This includes income gained through investments, interest, and payments, among other forms of unearned income.Ĭommon forms of passive income US expats may owe taxes on include retirement plan payments, income from foreign rental properties, and social security payments (in some circumstances). Passive income is also called “unearned income” and refers to income you didn’t actively work for. ![]() ![]() But you must report any passive income as well. The earned income mentioned above includes everything you have actively earned from your employer(s) and any clients (if applicable), as well as certain benefits (such as from a union strike or disability benefits). Let’s look at the breakdown side by side: For self-employed expats, however, the total is double, at 15.3%. For the 2022 tax year, the rate for expat employees is 7.65%. Some American expats who work abroad may also need to pay US social security and Medicare taxes on their earned income, especially if they are self-employed or work for a US-based employer. Make sure to use a reputable currency conversion calculator (and use the same one throughout for consistency’s sake). The figures on your tax return must always be converted into US dollars. If you’re not sure if you meet the tax filing requirement for your situation, check out our post about the minimum filing thresholds for various expat circumstances. However, there are some circumstances in which the minimums are even lower - such as if you’re self-employed ($400) or a US person married to a foreigner and filing separately, or vice versa ($5). ![]() For married couples filing jointly, that minimum changes to $25,900. Even folks living abroad who have never lived in the US or held an American passport could be on the hook for US taxes if they were born on American soil (including military bases) or have an American parent.Īll individual US persons who have earned a total of over $12,950 in 2022 must file a federal US tax return using IRS Form 1040. The US, however, taxes every US person (both American citizens and permanent residents/green card holders) on their worldwide income. Earned incomeĪlmost every other country in the world taxes either a) those who live in the country or b) those who earn income originating from that country. We’re here to shed some light on 12 key important pieces in the process. Luckily, the Bright!Tax team specializes in helping Americans abroad navigate the complicated world of US expat taxes. On top of that, they may also have to report foreign-registered businesses, bank accounts, investments, and other assets. For one, expats must often claim exemptions or credits to avoid double taxation. Unfortunately, for those who do need to, filing taxes from abroad is often more complex than filing them from within the US. Updated: Please note: Updates were made to capture changes for the 2022 tax year (read: the taxes you’ll file in 2023!)Īre you an American living in another country who’s not sure how to pay United States expat taxes? You’re far from alone - in fact, many don’t even know whether or not they need to file taxes. ![]()
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