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Living abroad? U.S. ties could leave you feeling taxed

As a United States citizen living outside the country, you may have had many exhilarating experiences in your time abroad. Your new country of residence may have cultural and governmental differences that allow you to gain knowledge on the various workings of another place. However, living abroad does not completely sever your ties to your native country, especially when it comes to taxes.

If you earn an income while living abroad, the United States will still tax your income. Only the U.S. and one other country impose taxes on their citizens while those citizens live in another country. Therefore, you may wish to understand how living abroad could affect your taxes before the next filing season.

Filing a U.S. tax return

Though you may have left the country in hopes of gaining fresh opportunities, the U.S. government has a reluctance to let you go, or, at the very least, to let your money go. Therefore, you must still file a U.S. tax return. Stipulations and exemptions exist that could eliminate your tax obligation, but you must still file a return. The necessity of this step ensures that you can claim the appropriate foreign tax credits and exclusions.

Foreign bank accounts

If you have money in foreign accounts, you have an obligation to file a Foreign Bank and Financial Account Report if your funds exceed $10,000. However, that stipulation does not mean that you have to have $10,000 in a single account. If you have multiple foreign accounts, you must add the money in all accounts together, and if that amount exceeds $10,000, you will need to file the form.

Tax-deferred accounts

Because each country handles its taxation differently, you could hold accounts in a foreign country that allow for tax deferments on certain funds. However, even if your country of residence allows for deferment, you may still have to face U.S. tax consequences if those same accounts do not face deferment here.

Proper filing

Because of the various rules and requirements that come along with taxation and living abroad, you may feel confused about how to address your taxes. Though a variety of tax preparation services exist, you may still have a hard time properly filing your return due to the complexity of your circumstances. Luckily, you could enlist the help of an experienced California attorney who has knowledge on the topic of filing U.S. taxes while living abroad or generating foreign income.

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