Disclaimer: This is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Consult with your own attorney, CPA, and/or other advisors regarding your specific situation.
There are a multitude of reasons why a U.S. citizen may move their money, assets, or even themselves and their family overseas.
Many think that since they don’t live here anymore, there’s no reason to pay taxes here anymore. Bad news, ex-pats: that couldn’t be further from the truth!
No matter where you go in the world, if you’re an American, you can’t outrun the IRS.
US Expat Taxes: What You Need To Know
All Americans, whether they live stateside or overseas, must file annual tax returns reporting income. There is quite a bit of bureaucracy to work through when you expatriate, but I’m here to help you navigate those murky reporting waters.
Responsibility #1: Report Your Assets
Do you have more than $10,000 total in foreign bank accounts? Or hold assets (stocks, company ownership, property, etc.) valued at more than $50,000? If so, you must disclose this information annually with FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR) and IRS Form 8938, Statement of Specified Financial Assets.
Say you have a bank account in Armenia, a country with a reciprocal tax treaty with the U.S. That bank account holds $99,999 and earns $10,000 in interest income this year. You pay the Armenian government $1,000 in taxes on that income. Along with complying with all Armenian tax filing regulations, you would need to fill out the FinCEN Form 114 (FBAR), due June 30, to disclose the foreign bank account, and the IRS Form 8938, since the account was more than $50,000, due with the filing of your federal tax return.
In addition, you’ll need to report the $10,000 of income from the account on your federal and/or state income tax return (Form 1040) but you will receive $1,000 in tax credits from Uncle Sam because of the tax treaty between the two countries.
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