A guide for US expats: How to prepare for your 2017 tax filing
Analyze Past Years Return
Many taxpayer’s tax returns report similar income from year to year. In preparation for your 2017 filing, review what you filed in 2016 and make note of what is similar and what has changed. This will give you an idea of what information you will need to gather in order to complete your 2017 return(s).
Know When to file
All U.S. Citizens, who have income in excess of the filing threshold, are required to file a US Income tax returns even if they are living and/or working abroad. The regular due date for US Income tax returns is April 15th. However, if you are living overseas on the due date then you are allowed an automatic 2-month extension to file your return (no application required, just make a note of it on your return). This extension extends your returns’ due date to June 15th. Please be aware however, that any tax due is still due by April 15th – and interest will begin accruing from this date. There are additional extensions available, upon application.
Make your Estimated Tax Payments
Not only does the IRS require that all U.S. Income taxes are paid by April 15th, they also require taxpayers to make their tax payments throughout the year by making estimated tax payments. Estimated tax payments are generally due April 15th, June 15th, September 15th, and January 15th. Taxpayers can generally avoid the estimated tax payment penalty by owning less than $1,000 in tax (after withholding and estimated tax payments), paying 90% or more of their current year tax or by paying 100% of their prior year tax, whichever is smaller.
Many taxpayers who live and/or work abroad make or should be making estimated tax payments because typically they have little to no U.S. federal withholding taken from their income. Therefore, now is the time to review your 2017 income and see if making an estimated tax payment is right for you.
Maximize Retirement Plan Contributions
For taxpayers who take advantage of tax retirement accounts, review your current contributions and decide if you wish to make any additional contributions before the end of the year. The IRA contribution limits for 2017 are $5,500 or $6,500 if you are 50 or older. If you are making contributions to a ROTH IRA or a Traditional IRA you can make prior year contributions up to April 15th.
Secure your personal information
These days it is important to make sure that your personal information is secure. Check your credit reports to make sure that there is no unauthorized activity. Only use trusted sites to help you with tax preparation. Always be cautious when providing personal information online.
Make your year-end gifts
The IRS allows each taxpayer to give to any one person $14,000 or less per year in cash, property, or gifts without having to file a gift tax return. This can help taxpayers with large estates reduce their estates without using their lifetime exclusion.
Be aware of the foreign account rules
If you own or have signing authority over any foreign bank accounts that at any time during the year had more than $10,000 equivalent cash in total (across all accounts) then you are required to file an “FBAR” (Foreign Bank Account Reporting Form). This form must be electronically filed before the deadline. The penalties for not filing are high so filing this information return is important.
If you maintain very high balances in your foreign accounts you are also required to file an IRS Form 8938, Statement of Specified Foreign Financial Assets.
There are also filing requirements if you meet certain thresholds of ownership in any foreign corporations or partnerships or are a beneficiary of a foreign trust. Just some of the forms that could be required to be filed are: Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations; Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund. All of these forms are available on the IRS website.
Acquire Help When Needed
The bottom line is that for many U.S. citizens living overseas the U.S. tax filing requirements can be complex and extensive. It is important that if you need help, you reach out to a tax professional who can help you navigate the requirements and keep you in compliance. Feel free to drop us a line at firstname.lastname@example.org if we can be of assistance. It’s hassle free, we guarantee!