Filing Requirements

Perhaps the single most complex area of living abroad is what constitutes tax compliance.  U.S. citizens wherever they reside are required to report their world-wide income to the Internal Revenue Service.  However many countries today mandate that all foreign residents, including U.S. citizens, also report their world-wide income. For many years, expatriates reported U.S. source income to the IRS and foreign source income to the paying country. 

As income is typically taxed at increasing rates according to total taxable income, the net affect of this separate reporting was a lower overall tax bill.  Now that both the country of citizenship and the country of residence often require world-wide income reporting, the potential for increased taxation is a natural unwanted consequence.  And with the exchange of tax information becoming increasingly facilitated by tax treaties between IRS and foreign country taxation authorities in the name of Avoidance of Double Taxation, expatriates are being required to comply with tax filing requirements from both their native and resident countries. 

So an International Tax Accountant with the necessary expertise to assist American expats in filing their tax returns without their being crucified by higher taxes is essential.  At TaxBarron we have the expertise to assist you through the complexities of these changing tax laws.

A tax return must be filed if your world-wide gross income is at least the amount of your filing status:

Filing Status	Amount
Single	$9,350
65 or older	$10,750
Head of Household	$12,050
65 or older	$13,450
Qualifying widow(er)	$15,050
65 or older	$16,150
Married Filing Jointly	$18,700
Not Living with Spouse at Year End	$3,650
One Spouse 65 or older	$19,800
Both Spouses 65 or older	$20,900
Married Filing Separately	$3,650

Income eliminated by the Foreign Earned Income Exclusion does not count in this calculation. Failure to report this income can result in denial of FEIE.

Income tax returns and tax payments must be received by IRS by the due dates. Unlike tax filers residing within the United States who are not counted as late filing as long as their mailings are postmarked by the due date, expatriates must take care to assure that their mailings are received by the due date. For this reason, filing electronically becomes important. US tax return Form 1040 and accompanying schedules with tax payment should be filed:

INTERNAL REVENUE SERVICE
PO Box 1303
Charlotte, NC 28201-1303

Otherwise where no payment is being sent:

INTERNAL REVENUE SERVICE
Austin, TX 73301-0215

Although expatriates have until 15 June 2011 (17 October 2011 with extension Form 4868) to assure delivery of their 2010 Income Tax Returns to IRS, they must take care that any taxes owed for 2010 be in the hands of IRS by 18 April 2011. Electronic filing and paying assures promptness. Payments for such liability should be sent with Form 4868 to:

PO Box 1302
Charlotte, NC 28201-1302

Form 4868 with no tax payment or tax returns should be sent by registered mail to:

INTERNAL REVENUE SERVICE
Austin, TX 73301-0215

Estimated Tax Payments must be made if your expected 2011 tax liability is at least $1,000. These payments are due on 18 April 2011, 15 June 2011, 15 September 2011 and 16 January 2012, and should be sent by registered mail and with Form 1040-ES to:

P.O. Box 1300
Charlotte, NC 28201-1300

INFORMATION RETURNS

Form 5471 concerns financial interest in foreign corporations. This lengthy Form is required filing for the following categories of persons:

• A shareholder who owns at least 10% of the outstanding stock of a foreign personal holding company (deleted)
• A U.S. citizen or resident who is an officer or director of a foreign corporation in which a U.S. peson acquired 10% in stock value
• A U.S. person who acquires stock valing 10% or else disposes of stock to below the stock ownership requirement
• A U.S. person who owns more than 50% of the value of a foreign corporation
• A U.S. shareholder who owns stock in a controlled foreign corporation; control representing »50% ownership by a U.S. person

A U.S. person is 1) a citizen or resident of the United States, 2) a domestic partnership, 3) A domestic corporation, 4) An estate or trust.

If required, Form 5471 should accompany your tax return. Failure to file this Form can incur a $10,000 penalty.

Form TD F 90-22.1 is an annual Report of Foreign Bank and Financial Accounts. This Form requires that you report any interests in foreign financial accounts if the aggregate value of such accounts is at least $10,000. This Form is filed annually by 30 June to:

U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621

At an annual tax seminar in Seville, Spain, in March, 2002, IRS agent Rick Smith with the Paris Service Centre stated that the proposed penalty for failing to file this Form is $25,000.