Perhaps the scariest element to moving abroad is figuring out US expat tax requirements, exceptions, and more. Here’s how I learned the hard way which American Expat Tax Services to use and NOT to use!
Now that I have assets and bank accounts in the United States, the United Kingdom, and Germany, I’ve spent an outrageous amount of money in 2020 to organize and consolidate my expat tax information… and I don’t even have that many assets.
A hard lesson to learn: just because you CAN move money all over the world, doesn’t mean you should.
In the past, my money habits haven’t always been the most… responsible… so I never really had any wealth that I needed to seriously consider or protect!
Now that my portfolio is a decent size, there are additional forms and fees I need to consider that weren’t even on my radar!
If you’re an expat living outside of America, I would highly recommend seeking professional expat tax services.
Cost of American Expat Tax Services
Because my situation was stupidly complicated, the costs associated with filing my taxes for 2020 include:
- $250 – consultation with a certified accountant
- $485 – Federal Tax Return Preparation
- $100 – The Foreign Bank Account Report (FBAR))
- $300 to $585 – Small Business Tax Return (final cost tbd)
The common mistakes that I’m going to highlight below cost me over $1,135 in expat tax service fees in 2020 alone!!! It was a painful mistake to make, but you need to spend money to protect money.
Now that I’m making an ‘adult salary,’ I decided to bite the bullet this year to ensure that my financial situation is tax-optimized moving forward. I want to protect every penny because I earned that money!
The Best US Expat Tax Service
Today I use My Expat Taxes to file while abroad and I couldn’t be happier! I’m able to carefully consider my entire financial situation in one location and they have helpful agents if I need additional support.
Filing taxes to the United States while abroad as an American passport holder is just a natural part of the process that you’re going to need to get used to.
Now that my financial situation has been cleaned up effectively (thanks to My Expat Taxes), I can finally focus on what truly matters… Which is making more money with less effort.
I‘ve lived abroad for many years and love helping others find work abroad and figure out their “Move Abroad Plan.” Check out my class below to get you started ASAP!
Live Abroad Resources
If you’re serious about wanting to live abroad, be sure to check out my two best resources:
- How to Move and Live Abroad (For Americans!) [Blog Post]
- My How to ‘Live Abroad’ Master Class [5-week, online course with end-to-end support]
Disclaimer: Before I continue, I want to remind everyone this article IS NOT tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Vanessa M.W. is not a certified financial advisor. You should consult your own tax, legal, and accounting advisors before engaging in any transaction
Informational Article Overview for Using US Expat Tax Services
In this article, you’re going to learn about:
- Information on reporting your salary
- Information on reporting your foreign bank accounts
There is a range of ways to report your income so once again – I can’t stress it enough – be sure to consult an expat tax service professional before moving forward with anything.
US Expat Tax Forms You Need to Be Aware Of
The United States treats all US passport holders as residents; regardless if you’re in the country or not. This is why you’re required to file taxes every year, even if you’re not going to be required to pay anything to the government.
The Foreign Earned Income Exclusion (FEIE) allows you to exclude a certain amount of your FOREIGN EARNED income from US tax. For the tax year 2019 (filing in 2020), the exclusion amount is $105,900.
TIP: You can use the IRS Form 2555 (FEIE)
In practice, if you earned $112,000 in 2018, you can subtract $105,900 from your allowance, leaving $6,100 as taxable by the US.
There’s a variety of exceptions, allowances, and ‘stackable’ taxes that are applied in different scenarios so I would do more research on this subject independently.
The IRS still wants to know about money in foreign bank accounts especially if it produced any income such as interest and/or capital gains. These are called “FBAR” and “FATCA” and based on your circumstances, this may or may not apply to you.
The FBAR (Foreign Bank Account Report) should be filed if your aggregate foreign holdings are worth $10,000 or more at any time during the tax year. The FBAR must be filed electronically as FinCen Form 114 and it should be filed by April 15th each year.
The FATCA (Foreign Account Tax Compliance Act) Form 8938 should be filed with your Form 1040 if your foreign assets exceed one of the following limits:
- Unmarried or married filing separately and living abroad: you should file Form 8938 if your foreign holdings are worth $200,000 or more on the last day of the tax year or were more than $300,000 at any time during the tax year;
- Married filing jointly and living abroad: you should file Form 8938 if your foreign holdings are worth $400,000 or more on the last day of the tax year or were more than $600,000 at any time during the tax year.
You can read up on tax requirements and exceptions on the following website: https://www.americansabroad.org/us-taxes-abroad-for-dummies-update/
In conclusion, get a good expat tax accountant or service. Tax fees pile up quickly and you don’t want to go years without filing and then end up paying outrageous fees and penalties on the money you’ve already been taxed on.
I moved abroad 100% on my own with no company to help me with immigration or tax so I’m learning as I go along.
Never did I ever think I would need to protect my wealth so actively, but I am very grateful to be in this position finally.
If you want to know more about specific services I’ve used in the past, please DM me directly on Instagram (@Wanderonwards) for an immediate response.