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Working Abroad and Your Tax Obligations

January 08, 2016  |   Tax Advice,Tax Tips   |   Tags: , , , ,  

For Americans working abroad, most of the tax filing and reporting requirements are the same as it applies to those residing in the U.S. If a person is a citizen of the United States (even those with dual citizenship), they are required to report and pay taxes on their worldwide income. U.S. citizens, resident aliens and those holding a green card when working abroad are considered ‘taxpayers living abroad’.

U.S. Taxpayer Identification Number

To file a tax return, a taxpayer must have either a Social Security Number (SSN) or an individual taxpayer identification number (ITIN). The identification number is to be included in the tax return.

Americans living abroad can request a SSN by using Form SS-5, Application for a Social Security Card. To request an ITIN, they may use Form W-7, Application for IRS Individual Taxpayer Identification Number.

Return Filing

Americans working abroad get more time to file their tax returns. They are allowed an additional 2-month extension to file their returns. This extension is automatic and does not require any action from the taxpayer. For 2016, the filing deadline for taxpayers living abroad is June 18, 2016. For Americans residing in the U.S., the deadline is April 18, 2016.

Taxpayers living abroad can download tax forms from the IRS website – irs.gov – and mail them to the IRS at:

Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA

Estimated tax payments need to be mailed with Form 1040-ES to:

Internal Revenue Service
P.O. Box 1300
Charlotte, NC 28201-1300
USA

If the return is not filed and the taxes not paid by the due date, the IRS charges penalties and interest on the unpaid taxes.

Report of Foreign Bank and Financial Accounts

If you had a financial interest, a signature authority or other authority over a bank or other financial account in a foreign country, the value of which is more than $10,000, you are required to file the Foreign Bank and Financial Accounts (FBAR) form. You need to file this form by June 30 each year and mail it to the Department of Treasury at the address on the form. This form is not to be sent to the IRS or attached with Form 1040.

You are excluded from filing an FBAR form if your assets are with a U.S. military banking facility operated by a U.S. financial institution.

Under the Foreign Account Tax Compliant Act (FATCA), non-compliance by taxpayers living abroad is penalized heavily. Failure to file FBAR can result in a fine of up to $500,000 and imprisonment of up to 10 years. Even non-willful civil FBAR violations can trigger a penalty of $10,000. Therefore, taxpayers living abroad must make sure that they report and pay taxes in the U.S. on time.