Prepared by : Anafin Consulting
Date : June 2016
US Taxes for Expats Residing Outside the US
Email: [email protected] © Copyright Anafin Consulting
• This presentation is for individuals who are residing outside
the US and who need to comply with US tax laws.
• This presentation will give you an overview of various tax
provisions which need to be complied with.
Who is this presentation for?
Email: [email protected]
This presentation is generic in nature. Every situation is unique and the facts mentioned in this presentation may not be applicable in your situation. So it is always better to check the facts applicable in your case or consult a professional.
© Copyright Anafin Consulting
Disclaimer
Email: [email protected] © Copyright Anafin Consulting
You are required to file your US tax returns if :
• You are a US citizen or a resident alien AND
• Your income exceeds the maximum amount chargeable to tax.
At times, even if your income is less than the maximum amount chargeable to tax, you may still be required to file a return if you are claiming certain deductions, credits and exemptions.
Are you required to file your US tax returns?
Email: [email protected] © Copyright Anafin Consulting
Who is a US citizen or a resident alien ?
You fall under the definition if you comply with any of the
following
You are a US citizen OR
A Green Card Holder OR
You comply with the substantial presence test
Email: [email protected] © Copyright Anafin Consulting
In order to comply with this test, you must be physically present
in the United States for at least
• 31 days during the current calendar year, and
• A total of 183 days during the current year and the 2 preceding
years, counting all the days of physical presence in the current
year, but only 1/3 the number of days of presence in the first
preceding year, and only 1/6 the number of days in the second
preceding year.
What is Substantial Presence Test ?
Email: [email protected] © Copyright Anafin Consulting
What is the minimum income chargeable to tax ?
Filing Status Amount
Single 10,300
Married Filing Separately 4,000
Married Filing Jointly 20,600
Head of Household 13,250
Qualified Widower 16,600
The above amounts are different for taxpayers 65 years and older.
Email: [email protected] © Copyright Anafin Consulting
If you fall in the above categories, you need to file US tax
returns and disclose your “global” or your “world wide”
income.
Disclosure of Global Income
Email: [email protected] © Copyright Anafin Consulting
Is my income subject to double taxation?
The fact that you need to disclose your global income
does not mean that you are subject to double taxation.
You can avail the different provisions in the US tax laws,
tax laws of your country of residence and the Double
Taxation Avoidance Agreement (DTAA) signed between
the two countries which help you to avoid double
taxation.
You need to have a thorough knowledge of the provisions
applicable in your case
Email: [email protected] © Copyright Anafin Consulting
What is the deadline to file my taxes ?
June 15, 2016
Normal deadline to file taxes for individuals residing outside
the US.
October 15, 2016
A 2 month extension can be applied for by filling Form 4868
December 15, 2016
Can be applied to the IRS in special circumstances or if you
need time to comply with the bona fide residence test or the
physical presence test.
Email: [email protected] © Copyright Anafin Consulting
• Form 1040/ 1040A/ 1040EZ – Individual Income Tax Return
Form
The following forms may required to be attached to Form
1040/1040A/ 1040EZ
• Form 2555 – Foreign Earned Income Exclusion
• Form 1116 – Foreign Tax Credit
• Form 8621 – Foreign Mutual Funds
• Form 8939 – Statement of Specified Foreign Financial Assets
Tax Forms commonly required to be filed
Email: [email protected] © Copyright Anafin Consulting
• Form FinCEN ( commonly known as FBAR)
• Form 3520 – Information regarding gifts received from
foreign persons
• Form 5471 – Report Ownership in foreign corporation
Other Forms
What are the different tax provisions which help you to avoid
double taxation ?
Email: [email protected] © Copyright Anafin Consulting
Form 2555 – Foreign Earned Income Exclusion
• This form allows you to “exclude” a certain amount from
your taxable income which is “earned” in a “foreign
country”
• Available on salary or business consultancy income up to
$ 100,80 for 2016 “per earning member”
• In order to claim this deduction, you need to satisfy
either the “boa fide residence test” or the “physical
presence test”
Email: [email protected] © Copyright Anafin Consulting
Form 1116 – Foreign Tax Credit
• This form allows you to take a credit of taxes paid in a
foreign country on your US tax return
• In order to claim the credit, your income should have
been “taxed” in a foreign country and taxes should have
been paid on that income
• Foreign tax credit can be availed only to the extent of
taxes paid.
Email: [email protected] © Copyright Anafin Consulting
Form 8621 – Foreign Mutual Funds
• Investments made by US persons in foreign mutual funds
may be subject to US income taxation as in investment in
PFIC (Passive Foreign Investment Company)
• Tax and reporting requirements of PFIC are very complex.
• Not reporting PFIC in your tax returns could lead to
severe penalties and future complications.
Email: [email protected] © Copyright Anafin Consulting
Form 8938 – Statement of Specified Foreign Financial Assets
• You need to fill out this form and send it with the tax
return if you have certain foreign financial assets
exceeding a certain amount.
• Please check the definition of “Foreign Financial Assets”
has been defined by the IRS.
• The amount depends on your filing status and place of
residence.
Email: [email protected] © Copyright Anafin Consulting
FBAR – Report of Foreign Bank and Financial Accounts
• You need to file Form FinCEN commonly known as FBAR if
you had any financial interest, signature or other
authority over a bank, securities, or other financial
account in a foreign country.
• This form is to be filed if the aggregate account balance
exceeds $ 10,000 at any time during the tax year.
• The due date for filing this form for the tax year 2015 is
June 30th, 2016. It is to be filed electronically at
http://bsaefiling.fincen.treas.gov/main.html
Email: [email protected] © Copyright Anafin Consulting
Form 3520 – Receipt of Foreign Gifts
• If you receive gifts from a foreign person exceeding $
100,000 in a year, you need to file Form 3520.
• This is only a information return. No tax is required to be
paid.
• The due date for filing Form 3520 is the same as your tax
return, but it is filed separately from your tax return to a
separate address.
Email: [email protected] © Copyright Anafin Consulting
Form 5471 – Report of Ownership in Foreign Corporations
• If you own more than 10% of a Foreign Corporation, you
need to file Form 5471 with your personal tax return.
• On this form, you need to report the ownership of the
corporation, Balance Sheet and Income statement for the
current year.
• This form is filed as an attachment to the tax return and
filed by the due date (including extensions) for that
return.
Email: [email protected] © Copyright Anafin Consulting
IRS Amnesty Program
• For all those who have not been compliant, the IRS has
given a chance to non will full violators to become
compliant.
• You can file your tax returns for the last 3 years and
FBARs for the last 6 years under the IRS Amnesty
Program without any penalties.
• The timeline for the amnesty scheme has not been
specified. So you need to act fast if you want to
streamline. Check the IRS website or visit us for more
details.
Get in touch for a 15 minute free consultation
Email : [email protected]
Website : www.anafin.net
If you want any additional information on any of the topics covered in these slides, visit our website or