By law, U.S. citizens and resident aliens living abroad must file a U.S. income tax return and report any worldwide income. Some key tax benefits, such as the foreign earned income exclusion, are only available to those who file U.S. returns. As such, if you are living or working outside the United States and Puerto Rico, you generally must file and pay your tax the same way as people living in the U.S. This includes people with dual citizenship. Here’s what taxpayers need to know about reporting foreign income:
If you are living or working outside the United States, you generally must file and pay your tax in the same way as people living in the U.S. This includes people with dual citizenship.
In addition, U.S. taxpayers with foreign accounts exceeding certain thresholds may be required to file Form FinCen114, known as the “FBAR,” as well as Form 8938, also referred to as “FATCA.”
Are you approaching retirement age and wondering where you can retire to make your retirement nest egg last longer? Retiring abroad may be the answer. But first, it’s important to look at the tax implications because not all retirement country destinations are created equal.
Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime. If you’re an expat who has relinquished—or intends to relinquish—your U.S. citizenship but still has U.S. tax filing obligations (including owing back taxes), you’ll be relieved to know there are IRS procedures in place that allow you to come into compliance and receive relief for any back taxes owed. Let’s take a look: