As we’ve repeatedly emphasized in our tax blog, US citizens abroad must report worldwide income and are required to file an income tax return with the Internal Revenue Service. As the IRS has stated, “If you are a US citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.” While tax requirements are “generally the same” for American citizens in the US and abroad, those with foreign income are affected by some additional considerations, such as the foreign earned income exclusion. If you live or work abroad, you may need to use some of the forms described below when you file in 2016.
Filing an Income Tax Return (Form 1040) as a Citizen Abroad in 2016
Like US citizens who reside in the United States, US citizens abroad use Form 1040 or its variants to file a federal income tax return. US resident aliens (Green Card holders) also use Form 1040. Nonresident aliens, however, should use Form 1040NR.
The deadline to file an income tax return, normally April 15, is delayed until April 18, 2016 due to the timing of Emancipation Day. However, if you are unable to meet the 2016 tax filing deadline, you have two more chances to submit your tax return to the IRS:
- June 18, 2016 — As a US citizen abroad (or military member on duty) during the regular April 18 filing deadline, you automatically qualify for a two-month filing extension.
- You should file Form 2350 (Application for Extension of Time to File US Income Tax Return) to request a deadline extension if you (1) intend to file Form 2555 or Form 2555EZ, which are discussed in the next section, and (2) need additional time to satisfy the physical presence test or bona fide residence test, which is necessary if you wish to qualify for the foreign housing deduction, foreign housing exclusion, or foreign earned income exclusion.
- In the future, keep in mind that this extension normally brings the deadline to June 15, not June 18.
- October 17, 2016 — If you cannot make the June 18 deadline, you still have one more chance. In order to obtain a six-month extension until October, taxpayers abroad should file Form 4868 (Application for Automatic Extension of Time to File US Individual Income Tax Return).
a. Again, remember the October deadline extension normally brings the due date to October 15. This year, however, the extension lasts until October 17.
9 Important Tax Forms for US Citizens, Resident Aliens, and American Expatriates
- FinCEN Report 114 (previously TD F 90-22.1) — Report of Foreign Bank and Financial Accounts (FBAR)
- Who must file it? You must file an FBAR if you are a US person who had signature authority over, or financial interest in, one or more foreign bank accounts or other foreign financial accounts whose value exceeded $10,000 at any time during the year to be reported. Keep in mind persons required to file an FBAR may also need to file Form 3520 or Form 8938, discussed below.
- What is the deadline to file? April 15 annually (previously June 30). Importantly, you must file your FBAR with the Financial Crimes Enforcement Network (FinCEN), not the IRS. FBAR may only be filed online.
- What is this form used for? Disclosure of foreign income which exceeds certain financial thresholds. If you have foreign income, you may also be interested in learning about the IRS Offshore Voluntary Disclosure Program (OVDP).
- Form 673 — Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911
- Who may file it? Qualified employees who are US citizens.
- What is the deadline to file? If you believe you are eligible for the foreign earned income exclusion or foreign housing exclusion, you should file Form 673 when you are hired (and again each subsequent year).
- What is this form used for? Claiming exemptions from tax withholding on foreign wages, to the extent of the foreign housing exclusion or foreign earned income exclusion. More specifically, Form 673 is used by employees to state to their employers they meet either the physical presence test or bona fide residence test, and to estimate housing expenses for the foreign housing exclusion.
- Form 1116 — Foreign Tax Credit
- Who may file it? Taxpayers who qualify to claim the foreign tax credit. Note that Form 1116 is designed exclusively for individuals, trusts, and estates. Corporations should use Form 1118.
- What is the deadline to file? Attach Form 1116 to your Form 1040.
- What is this form used for? The foreign tax credit allows eligible taxpayers to avoid double-taxation by restricting the tax rate on worldwide income to the greater of the taxpayer’s US or foreign tax rate.
- Form 2555 — Foreign Earned Income
- Who may file it? Taxpayers who qualify to claim the foreign earned income exclusion. Additionally, Form 2555 must be used to claim the foreign housing deduction or exclusion. Otherwise, you may be able to use Form 2555EZ, the simplified version. Please note that US government employees are ineligible for the foreign earned income exclusion.
- What is the deadline to file? Attach Form 2555 to your Form 1040.
- What is this form used for? By claiming the foreign earned income exclusion, eligible US citizens and resident aliens can avoid double-taxation.
- Form 3520 — Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts
- Who must file it? US persons with ownership over the assets of foreign trusts; US recipients of distributions from foreign trusts; parties responsible for disclosing “reportable events” (e.g. creation of foreign trusts); US recipients of more than $100,000 from foreign estates or nonresident aliens, or more than $15,601 from foreign partnerships or corporations.
- What is the deadline to file? Form 3520 is normally due when your Form 1040 is due, including deadline extensions.
- What is this form used for? Disclosing ownership of, and certain transactions involving, foreign trusts. Form 3520 is also used to disclose certain gifts and bequests from foreign persons.
- Form 3520-A — Annual Information Return of Foreign Trust With a US Owner
- Who must file it? Foreign trusts under US ownership, with certain exceptions related to Canadian RRSPs (registered retirement savings plans) and RRIFs (registered retirement income funds).
- What is the deadline to file? The 15th on the third month following the end of the tax year for the trust. Taxpayers file Form 7004 (Application for Automatic Extension of Time to File Certain Business Income Tax, Information, and Other Returns) to obtain a deadline extension for filing Form 3520-A.
- What is this form used for? Yearly disclosure of tax information involving foreign trusts with US beneficiaries.
- Form 3903 — Moving Expenses
- Who may file it? Employees whose workplaces relocate far away enough to meet specific criteria involving commute time and distance. These requirements may be waived for members of the military.
- What is the deadline to file? You should attach Form 3903 to your Form 1040.
- What is this form used for? Deducting certain work relocation-related expenses from your taxable income.
- Form 8854 — Initial and Annual Expatriation Statement
- Who must file it? People who have renounced their US citizenship or ended their long-term resident status, including covered expatriates.
- What is the deadline to file? You should file your first Form 8854 when you relinquish your citizenship. For subsequent years, the filing deadline is the same as the income tax return deadline (normally April 15, April 18 for 2016).
- What is this form used for? Form 8854 is used to verify that you have expatriated for tax purposes, or that you are in compliance with federal tax requirements for the five years preceding expatriation.
- Form 8938 — Statement of Specified Foreign Financial Assets
- Who must file it? Specified individuals with interest in specified foreign assets, if such assets both (1) are subject to reporting requirements and (2) exceed certain financial thresholds. Depending on the circumstances, these thresholds can range from $200,000 to $600,000 for US taxpayers abroad.
- What is the deadline to file? You should attach Form 8938 to your Form 1040, even when using one of the deadline extensions provided for filing your income tax return.
- What is this form used for? Disclosing foreign financial assets that exceed certain thresholds.
Get the Guidance of CPA Ted Kleinman
Don’t struggle to interpret a dense, confusing tax code on your own. Even small errors could cost you. If you need help filing taxes in 2016, you can rely on US tax accountant Ted Kleinman for personalized tax guidance. As founder of US Tax Help, Ted has over 20 years of experience assisting American expats and citizens abroad with international and expatriation tax preparation. Call Ted at (800) 810-9312 today to talk about your tax matter in a free and confidential consultation.