Business Blog for Small Business

Did You Know US Citizens Living Abroad Pay Taxes?

05/29/2013 01:26

When it comes to income tax, USA residents have a bevy of information about how to handle their IRS responsibilities. However, what about when you are living abroad? Whether you are soaking in the sun on a beach in Europe or working for days on end in Chinese corporation, as a US citizen you are still obligated to file and pay taxes—even if your stay has been for the full tax year.


So What's the Deal?

Paying taxes abroad sounds absurd. After all, you're probably paying income tax in the country you're living in. Why should you have to double up? Unfortunately, there's no easy answer to that aside from, “Because they said so.”

The US government is in a tax partnership with a lot of the major countries, too, making it impossible to avoid repercussions for failing to file and pay your U.S. taxes abroad. This makes it tough on people who are moving for the purpose of tax dodging in the first place.

Luckily, There Is Help

There are various foreign tax credit options to help dampen the effect of having to pay a U.S. tax abroad. Even the IRS agrees that paying a US income tax and income tax in a foreign country is a bit wonky, so in some situations there is a dollar-for-dollar tax credit to prevent this double taxation.

In addition there are various income minimums (based on amount of money made and marital filing status) which effect whether you actually need to worry about all this stuff. While the IRS has it constructed to get taxes, it isn't a horrible burden.


(Remember that the above only applies to earned income. Any money received through rentals, interest, etc, will need to be reported as usual.)


There is a Catch...

As with anything outside the realm of normal when dealing with taxes, expat taxes are complicated. If you have any questions about whether you are doing things right, or simply want to wash your hands of the paperwork, hiring an expat tax consultant will help you ensure you have your ducks in a row, both in terms of doing the right things in your filing and in money-saving tax credits.

Especially since a failure to do your taxes right can result in thousands of dollars of unnecessary tax payments or, alternately, tax trouble—paying for a tax consultant who specializes in expat/foreign living situations will ease the worries you have with taxes.