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Barron's International Tax Service

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Must A Tax Return Be Filed?

American expatriates often ask whether they have to file a tax return.  After all, if they are already considered residents of a foreign country and filing and paying taxes on world-wide income to their adopted country, why report the same world-wide income stateside?

The Internal Revenue Service does in fact excuse some non-filing, but based on certain criteria.  The most fundamental is defined by filing status and income.  According to IRS, you must file a tax return by 15 June 2008 if in 2007:

Filing Status	Amount
Single	$8,750
65 or older	$10,050
Head of Household	$11,250
65 or older	$12,550
Qualifying widow(er)	$14,100
65 or older	$15,150
Married Filing Jointly	$17,500
Not Living with Spouse at Year End	$3,400
One Spouse 65 or older	$18,550
Both Spouses 65 or older	$19,600
Married Filing Separately	$3,400

 

IRS defines Gross Income as Wages and Tips, Self-employment Income, Taxable Scholarships, Taxable Interest and Dividends, Capital Gains, Taxable Pensions and Annuities, Rents, Trust Distributions and, in certain circumstances, Social Security.  Also, for purposes of Gross Income, they include any Tax Free Home Sales and Tax Free Foreign Earned Income (even though such income up to $80,000 can be excluded from U.S. taxation).

In cases where total Gross Income is below the Filing Status threshold, a tax return must still be filed if:

• You are entitled to a tax refund from U.S. wages or one based on the Earned Income Credit;
• You owe Alternate Minimum Tax;
  
• You are a non-resident alien with a U.S. business;
  
• You are self-employed and potentially owe self-employment tax from net income of $400 or more.

Otherwise, prospective U.S. tax filers can exclude from Gross Income any Tax-exempt Interest, Tax-free Fringe Benefits, Qualifying Scholarships, and Life Insurance proceeds.