Affordable expat tax service options, extension deadlines, and more! This guide to filing taxes for American expats is for those who want to understand more about US expat tax deadlines, filing expectations, affordable expat tax service providers, and what to do if you have never filed a tax return.
Do US Expats Pay Taxes?
This is a trick question. Not only do American expats have to pay taxes in their new country of residence, but they also are responsible for filing taxes back home.
As specified by the IRS, ‘… if you are a U.S. citizen or a [green card] resident living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live.’
Filing taxes is different from paying taxes, however.
Yes, you need to file taxes every year, but different exclusions and ways of filing could potentially exclude you from paying taxes in the United States. In a previous article, I dive deeper into tax filing and common mistakes.
In this post, we’re going to cover:
- Expat Tax Basics
- Tax Deadlines
- What to do if you’ve never filed taxes
- How to file your own taxes using the ‘MyExpatTaxes’ Service
This is a sponsored post in cooperation with MyExpatTaxes. Nevertheless, all of the opinions are of my own volition and I’ll be providing my honest feedback on their information and services.
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.
US Expat Tax Basics
Before we go into the nitty-gritty of options and services, have you read my original ‘US Expat Tax Mistakes’ blog post?
If you’re at the very start of your expat tax journey, you’ll want to start with the previous article. Let’s review a couple of important things quickly.
There are two main things that the US government wants information on:
- Your income abroad
- Your wealth abroad
You can use the Foreign Earned Income Exclusion (FEIE) to exclude a certain amount of your foreign earned income from US tax. Then you can use the forms known as “FBAR” (Foreign Bank Account Report) and “FATCA” (Foreign Account Tax Compliance Act) to report your foreign bank accounts and any interest/capital gains you’ve made in that financial year.
You’re expected as an expat to file your US tax return by June 15th each year. The FBAR has an automatic extension to October 15th.
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US Expat Tax Deadlines
If you live outside of the United States, you are eligible for an automatic extension until June 15th according to the IRS.
This is helpful because different countries work with different financial years and sometimes you won’t get the information you need on time.
If you need more time filing your US tax return as an expat, you can file for a free extension. This grants you enough time to file your return until the October 15 deadline.
This is the extension filing deadline to file last calendar year’s tax return for those who received a 6-month extension. It is also the final due date for FBAR reporting.
September 15th is a critical day for non-personal tax filing and returns. If you own an American business (LLC or S Corporation), this is the filing due date for tax returns and payments.
If absolutely necessary, you can file in October for an additional 2-month extension for your US tax return until December 15th.
In order to file until this deadline, you’ll need to send a paper letter to the IRS including the tax return you need an extension for, and a reason for why you couldn’t file on time.
You can read more about deadlines and specifications on the MyExpatTaxes blog.
Consequences for Filing Taxes Late as a US Expat
Don’t play with fire! There are two ways to make an enemy out of the IRS quickly; failure to file and failure to pay tax on reported income.
The penalties for these violations typically are a percentage of the unpaid tax that you owe, ranging from 0.5% to 5%.
As you’re already paying income tax in your country of residency, the FEIE will likely shield most of your income from additional taxation. Dodging the IRS is likely not worth the headache.
For more information on important tax deadlines and consequences, read more about consequences for late filing on MyExpatTaxes.
Are you a US Citizen who has never filed a tax return?
Don’t panic! MyExpatTaxes has a streamlined service that will walk you through the IRS amnesty program. This program saves millions of US citizens from tax fines and serious consequences. In MyExpatTaxes’ streamlined service, you will enjoy
- Comprehensive Tax Support
- Personal support for entire process
- Year-round Coverage
- Professional Tax Review and Consulting
- Tax Forms Signed by Certified Tax Professional
- Post submission IRS Audit Support
- Free Current Year Tax Amendment (as needed)
Stay on the IRS’s good side by filing the necessary paperwork. Trust me, sorting out your tax standing with the IRS is like lifting a weight off your shoulders.
Common US Expat Tax Myths & Pitfalls
1. You DO have to file every year
As an American, you’re legally required to file taxes every year. It doesn’t matter if you’re abroad.
2. Don’t Have Too Many Bank Accounts
When you have different bank accounts scattered across the world, this creates a real headache scenario because you’re required to report on them if your accounts combined exceed $10,000.
3. ‘Tax Advantaged’ Accounts Abroad aren’t necessarily shielded from US Tax
As I learned the hard way, just because you have a ‘tax advantaged’ ISA in the UK with a tax-free limit of £20,000… that doesn’t mean that money is necessarily protected from US tax!
In fact, you could end up paying up to 37% tax – every year – on your investment accounts if you don’t file properly.
4. You CAN move and invest money back home in America
It just depends on the type of account that you open. For example, I’m going to use my post-tax salary money to invest in a normal American brokerage.
Because I’m not eligible for tax-advantaged accounts currently, I will focus on paying 15% long-term capital gains tax by leaving that money in the brokerage for many years.
Capital gains tax rates on most assets held for less than a year are subjected to ordinary income tax brackets, which range from 10% to 37% tax.
5. You CAN open a company abroad, but you have to report that
For example, if you have a UK Limited company, there is a US reporting requirement for your company if it was active.
Even if there were no profits, you will need to report the income and expenses each year on the US Return.
How the MyExpatTax Technology Works
The MyExpatTaxes technology is incredibly intuitive and simple to progress through. I was able to run through the full end-to-end experience in just one evening.
I’ve created a few videos to give you a better idea of what lies behind the veil.
Getting Started with Your US Taxes
Starting your tax filing process with MyExpatTaxes is simple. You can access their software and fill out the necessary information without paying until you’re ready to submit.
I filled out my required information, verified my email, and then got started all in under 3 minutes.
First, I needed to establish if I’ve filed taxes before, then I identified the various countries I’ve lived in, and finally, I needed to state whether or not I’ve used FEIE versus Foreign Tax Credits in the past (there are different implications for both).
Based on your unique answers, the expat tax software will display different questions and filing requirements. This is because there are different tax implications for every country and individual circumstance. MyExpatTaxes takes the confusion out of this process by adapting to your feedback in real time.
Enter Your Specific Circumstances
Once you’ve entered a bit about your personal details, now you need to do a deep dive into your current income situation, add any dependents or family, and highlight any nuances. Based on these answers, the MyExpatTaxes technology will add or subtract additional steps in the process.
If you’re self-employed, that’s okay too. The MyExpatTaxes technology will walk you through a self-employment questionnaire to ensure your income isn’t double-taxed. I find that this is a particularly robust technology for self-employed people as it allows you to file tax deductions and expenses seamlessly during the user journey.
Once you’ve entered the foundational information needed, the MyExpatTaxes software will configure your experience based on your specific circumstances.
In the short video below, you can see that the FBAR and FEIE process is straightforward and relatively painless.
Then, the technology will walk you through the deductions so your whole financial picture is taken into consideration.
I was able to go through the entire filing process in under an hour thanks to the user-friendly MyExpatTaxes technology.
I had all of my necessary financial information in an electronic folder in the cloud before starting and this helped immensely.
Get a Discount with MyExpatTaxes
As a way to say thanks for being a Wander Onwards reader, click here to enjoy a discount off your MyExpatTaxes service, which will be automatically applied when you checkout.
UPDATED- My Final Thoughts
Overall, this is the best and most affordable self-service tax technology I’ve ever seen. Finally, there’s an intuitive system that is both user-friendly, personalized, and priced affordably.
In the past, I’ve spent literally thousands of dollars hiring accounts and consultants to figure out the mess that once was my tax situation and it would have never gotten this bad if I knew about MyExpatTaxes in 2013.
UPDATED 19/2/2021 – My tax situation has been a NIGHTMARE for years and I have always needed to hire multiple accountants in order to report my UK, US, and German income and assets properly.
HOWEVER, after I spoke to the founder of My Expat Taxes and a business consultant, we were able to pull 100% of my tax reporting and processing under one roof!
I am officially a My Expat Taxes client and I couldn’t be more thrilled to finally be done with my tax nightmare!
They are helping me report my US LLC, my UK Limited company, all of my investment dividends, my foreign earned income, and MORE! What a weight off my shoulders for good and I am so grateful.