Living abroad may seem to attract- with so lucrative opportunities to explore a new culture, tasting new cuisines, meet new people, develop businesses as well as careers. But this decision comes with its share of responsibility to US taxation Singapore as well. US citizens who move overseas or across the borders still have to deal with the Internal Revenue Service and its personnel of tax collectors, and the process of filing a return and paying the associated taxes can be much more complicated as an expat.
Many US citizens believe that leaving the country will provide them relaxation of their obligations to the IRS; even if you know that you are required to file, you may not know the procedures it takes to submit a federal income tax return for expats. If you are an expatriate and would like to know how to file your proposed taxes with the US government, keep reading the guide to know your best possible outcomes.
Filing and paying taxes as a US Citizen living abroad
If you are a US citizen living abroad, make sure to fill out and file the required IRS Form 1040, individual USA taxation Singapore filing return income, just as the way you used to file in the United States. Most of the information mentioned in this form will be the same regardless of the point: US ex-pats living abroad are eligible for an automatic two-month tax filing extension, making the deadline effective from June 15 for Americans living outside the country.
However, this deadline is applicable for filing a tax return as an expatriate, not to pay what you owe. So, any payments you make will begin accruing interest starting 15th April. There are other extensions also available to expats- which again can only apply to file your paperwork, not sending your payments. Expats can add four months to the automatic extension period, and in special circumstances, it’s even possible for expats living abroad to get an additional two months, making their final tax filing deadline 15 December.
Tax breaks for US expats living abroad
Though the tax return filing process for expats living abroad is more complicated, however, there are some advantages for them as well. One of the biggest perks of living in another country is that you are allowed to exclude a significant portion of your income from taxation amount- to avoid double taxation on expats.
Moreover, by having a reliable American taxation service, it’s become easy to address the two major tax provisions which help expats in reducing their US-based taxes, namely Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC).
Foreign Earned Income Exclusion
If you earn wages in a country where you are effectively a resident, you are eligible to reduce or eliminate your taxable income under the FEIE provision. To access this provision, you must pass either the bona fide residence test- which requires a proof that shows that you are a resident of another country for at one full tax year- or the physical presence test which requires that you be physically present in another country for at least 330 complete days.
Foreign Tax Credit
It is a tool that permits US citizens- those who are subjected to US taxation to claim credit and effectively reduce their taxable income by that taxation amount. For example, if you fail to qualify for FEIE, but earned income abroad, then you are eligible to utilize FTC provisions and avoid double taxation.
Although the provisions mentioned above determines the most common tax filing concerns for US expats, however, there are many yet to know in compliance with the IRS. If you are an expatriate, let the experts offering USA tax services guide you through the tax provisions so you can avoid penalties and claim deductions, for which you are likely eligible.