About to be a new expatriate?
First Year Abroad
There are some important tax matters you need to know before you go. Global Tax Help has prepared an overview for your first year abroad. Should you have additional questions, please use our Info Request form– we’ll be happy to help you prepare!
All US citizens are required to report their worldwide income
You should know first and foremost that all US citizens are required to report their worldwide income to the IRS on their tax return. The two primary forms required for expat returns, in addition to the usual Form 1040, etc., are Form 2555 (PDF) – Foreign Earned Income Exclusion (instructions) and Form 1116 (PDF) – Foreign Tax Credit (instructions).
You are also required to pay into a social security system. The US has Totalization Agreements with countries to ensure that you are not having to pay into two systems, but you must pay into one.
US citizens who live abroad get an automatic 2 month extension to file until June 15th. However, if you want to extend this until October, you will need to file for an extension by April 15th. Make sure to check with your state to see if they accept the federal extension or whether you need to file an extension with the state as well. Filing an extension is never a bad idea for expats— it gives you additional time to decide what you are going to do.
There’s good news, though: the IRS provides two tools to help reduce, or eliminate, double taxation for expatriates. The first is the Foreign Earned Income Exclusion, which if you qualify, allows you to exclude up to $104,100 for the 2018 tax year. If you want to claim the Foreign Earned Income Exclusion, you will need to meet the Physical Presence Test. This means you must be outside the US for 330 days out of a 365 day period. Most expats tend to file extensions in their first year so that they can be eligible for the exclusion. Please visit our Expat Tax Basics page for more information. The second tool is the Foreign Tax Credit. This, potentially, gives you up to a dollar-for-dollar credit against your US taxes for taxes paid to foreign country. We recommend that you contact a tax expert in your new country for assisting in filing your taxes there. We use the information from your localized tax returns to calculate your Foreign Tax Credit.
Here is a useful checklist for planning your international move:
Investigate Your New Country’s Rules
o Visas and permits
o Vaccines for family members
o Restrictions or taxes on shipped household items
o Taxes involved in shipping your car
o Vaccines and quarantines for pets
File Applications for Passports, Visas and Permits
Gather Important Documents
o Birth and Marriage Certificates
o Naturalization, Green Card, Proof of Citizenship, etc.
o Social Security Cards
o Vaccination, Medical and Dental Records
o Insurance Policies
o Academic Records and Diplomas
o Employment Records
o Proof of Residency (utility bill, statement, etc.)
o Living Will and Testament