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Expat Articles » What to do Before the Move... A Guide from a Tax Perspective

What to do Before the Move... A Guide from a Tax Perspective

By Greenback Expat Tax Services

Moving internationally means more than just relocating to a new home. Becoming an expatriate involves moving your money too, which always leads to taxes. Getting your finances in order before moving out of the United States is something you need to do in advance— about six months — rather than after you get there. Opening a bank account, dealing with foreign taxes, trying to figure out how to buy property can all be a little overwhelming. Not to mention learning about all the rules and regulations for filing U.S. taxes. So, if you're planning on moving overseas, check out these helpful tips to prepare yourself, and your taxes, before you go.

You still must file U.S. taxes!

According to the IRS, if you are a U.S. 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 living in the United States or abroad. Your worldwide income is subject to U.S. income, federal and state taxes, regardless of where you reside. If you pay taxes to another country, you’re required to file a U.S. expat tax return if you have earned over these thresholds:

Learn about the Foreign Earned Income Tax Exclusion!

Being an expat comes with some pretty great benefits for reducing the effects of double taxation. All expats are eligible for the Foreign Earned Income Exclusion, which allows you to exclude $92,900 from your foreign earned income! Make sure you qualify each year by having a foreign earned income, a tax home in a foreign country, reside in a country with a non-discriminatory tax treaty with the United States, and pass either the Physical Presence Test or the Bona Fide Resident Test. Also check out information on the Foreign Housing Allowance and Foreign Tax Credit to save you even more money!

Know your Deadlines!

Expat tax deadlines are a little bit different than those for citizens that still live in the States. For example, here are the deadlines for 2011 income taxes: April 17 – Expats must pay any taxes owed to the IRS, regardless of whether or not a return has been filed. June 15 – Automatic extension for expats to file their returns, even though taxes must be paid by April 17th. June 30 – FBAR must be received by the U.S. Treasury Department in order to avoid penalties. There are no extensions. October 15 – This is the final extension date for expats to file. Failure to adhere to these deadlines could mean big money in penalties.

FBAR, Form 8938, Oh My!

An FBAR is a Report of Foreign Bank and Financial Account. The form number is TD F 90-22.1 If you are an American citizen, resident alien, trust, estate, or domestic entity and have $10,000 or more (USD equivalents included) in a foreign bank or financial account at any point during the calendar year, you are required to file this form separately from your taxes. Form 8938 or the Statement of Specified Foreign Financial Assets is required if your foreign assets meet and exceed the $50,000 threshold for the year and it is filed along with your taxes. Keep in mind that these forms are different and one does not replace the other. Know which one you have to submit, and make sure to meet the deadlines because the penalties are steep!

Keep it Organized and Get Started Early!

Before you move, and after you’ve settled into your new country, it is extremely important to keep all of your financial and tax documents organized. Make sure that you’ve notified the IRS, and all-important financial institutions of your new address, and forward all mail so you don’t miss anything. Getting started early on your tax preparation is critical, especially if this is the first time you will be filing as an expat. And, don’t be afraid to consult an expat tax expert for help!

What other advice and suggestions do you have for people getting ready to move out of the United States?


© Greenback Expat Tax Services

This article is written by Greenback Expat Tax Services. We are a team of specialized CPA’s and EA’s that deal only with expat taxes, and have been for over thirty years! Look us up today to make this your most painless tax year yet!