“I’ve just gotten residence in Ecuador. That means I don’t have to file my U.S. taxes anymore, doesn’t it?”
This is the type of question I hear regularly.
There are many misconceptions about Americans living overseas, a common one being that once you move overseas, you are no longer required to file a tax return.
This is simply not true. In fact, to take advantage of the benefits offered to American citizens living overseas, you have to file your U.S. tax return.
With that in mind, here are some of my top tips for filing your U.S. tax returns correctly when you live overseas:
File your U.S. tax return on time: If you are out of the U.S. on April 15th, you have an automatic filing extension to June 15th. However, you may file a regular extension to October 15th, just as if you were in the U.S. (It’s important to always file a return or file for a six-month extension…automatic extension is for federal tax returns only).
Correctly file your U.S. tax return: Even if there are no taxes due, especially if you are living overseas, you still need to file a return. This is a great way to keep an on-going record of your filing compliance and keep the IRS from seeking to audit you for an unfiled year.
Report all income received, U.S. and foreign: Remember, Americans are taxed on worldwide income, not just what is earned in the U.S. This includes dividends, interest, capital gains, alimony, pensions, annuities, and Social Security, along with business and rental incomes.
Defer, reduce, and eliminate tax where possible: Be aware of, and make use of the top foreign tax benefits available to Americans overseas…they can save you money. These include the Foreign Earned Income Exclusion, Foreign Housing Allowance/Deduction, and the Foreign Tax Credit (I go into more detail about these in my book Expat Taxes Made Easy). If you have business or rental income, be sure to utilize those expenses as well.
While it’s important for every American citizen to understand IRS regulations, if you’re thinking of living, working, or investing abroad, it’s even more important. That’s because, for American expats, there is a whole other set of IRS regulations for you to understand.
Informing yourself of all the IRS regulations is a sensible idea—and could save you thousands of dollars.
That’s why I wrote Expat Taxes Made Easy: The Complete Guide to U.S. and Foreign Taxes for the American Overseas. In clear, everyday language, I’m giving you my 30 years of experience—to make sure you understand how to keep yourself out of trouble with the IRS…and that you’re saving all you’re entitled to save on your tax bill. That in turn will allow you to free up the finances you need to really enjoy your life overseas.
Because this book is updated annually, I can give you the most up-to-date information around on your tax responsibilities overseas. I’ve always seen it as my job to put myself between my clients and the IRS. One way I do that is to make sure my clients are well-educated in the best tax practices for their lifestyle. It’s my goal with this tax book that you have the best information available, too.
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