Again we welcome our expat tax expert Joshua Katz, owner of the firm Universal Tax Professionals which specializes in expat taxes for Americans living abroad. Having only briefly been an employee, I tried to come up with common questions, however, if you think you may have made a mistake or would like to know more about one of the general subject covered here, I strongly suggest you navigate to his site and send an email. He’s friendly, I promise…even if you are an accounting and tax neophyte like myself.
Q: What is the threshold for which I need to declare income earned in tax-free countries?
A: This would depend on the income and your filing status. As a very general and approximate amount this would be $10,000.
Q: Can I claim the taxes my employer is taking out against the taxes owed to the US?
Q: To be paid I had to open a local bank account. Do I need to declare that to the IRS?
A: Probably, as a US citizen the bank will most likely ask you to fill out certain forms such as a W9 .In addition, you will need to file an FBAR if the account will have in excess of $10,000 at any time during the year.
Q: I want to transfer money from my local salary to my US investments or account. How do I declare this? Is it under the same rules as contributing to an IRA?
A: Transferring money to your US account has no tax bearings however only the transfer of monies to your IRA account will qualify as an IRA contribution.
Q: I have dependents i.e.a wife who can’t work or children. Can they still be declared dependents on my earnings?
A: Yes, providing they are US citizens and have SS numbers.
Q: My employer does not pay for school fees, accommodation, or insurance can I deduct this?
A: School fees such as University fees can be reported to obtain a tax credit depending on the type of degree and university, and Health Insurance premiums can be deducted on schedule A.
Q: Are there any audit flags I should watch out for when filing as a full time employed expat?
A: Nothing in particular, however, all foreign documents of income and tax items should be kept accordingly in case of an audit.
Q: What happens with the earnings on my investments?
A: Earnings on foreign investments are reported the same as earnings on US-based investments. Any foreign taxes paid on these foreign investments income can be claimed as a passive foreign tax credit.
Please note this is not sponsored content, as I had just finished ripping out clumps of my hair trying to find out what happened to the 2015 return, I joined a Facebook group for expat tax problems. I noticed Joshua’s answers were easy to understand and I approached him about creating a series, The comments section is open and Joshua is on Facebook. You can @mention him in the comments or email him directly from the link on his website.