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Expat Tax Blog

May 17

Giving Up Your Green Card? The IRS May Have a Surprise for You

by julie

As a Green Card (GC) holder, you have the same tax filing requirements as US citizens.  If you choose to give up on the American dream and surrender your Green Card, depending on how long you held your Green Card, there may be additional reporting requirements.  Importantly, until those requirements are settled, you will remain a US person for tax purposes, even if you proceed with the actual surrender process with immigration.

If you do meet these additional reporting requirements (more below), there may also be an “Exit Tax”.

How long did you have your GC?

If you give up your Green Card, it is important to know how long you have had the Green Card. There are two terms that must be understood:

– “Lawful Permanent Resident” – The day you received your GC, you became a lawful permanent resident

– “Long Term Resident” – If you held your green card for 8 or more years, then you are considered a long term resident, and are required to file form 8854.

Whole Story at TFX.

May 13

FAFSA & Your U.S. Tax Return – What You Need to Know

by julie

Congrats! Little Janie and Johnny are off to college, you did your job.  But – college isn’t free and your young scholars may need some assistance to pay for their degrees of higher learning.

Along with scholarships and other merit based programs, the Federal Government helps to pay for college via FAFSA (Free Application for Federal Student Aid).  In order to file the application to help the young whippersnappers pay for school, you must provide information from your U.S tax return.

2016-17 or 2017-18 FAFSA – Use Data From 2015 U.S. Tax Return

When completing a 2016/17 or 2017/18 FAFSA application, use information from 2015 U.S. tax return.

  • If you will attend college from July 1, 2016-June 30, 2017, you should submit the 2016-2017 FAFSA. You will use income and tax information from 2015.

  • If you will attend college from July 1, 2017-June 30, 2018, you should submit the 2017-2018 FAFSA. You will use income and tax information from 2015.

Note: Both the 2016-2017 and 2017-2018 FAFSAs ask for 2015 tax information.

How Do I Account for 529 Plans on FAFSA?

When completing the ‘net worth investments’ section as a parent, if you have one or more education savings accounts (ie – 529 Plan) – report that plan for every dependent child you have, even if some of those dependent children are not currently completing a FAFSA.  Ie – if Jackie is 17 and headed to college, but little Jimmy is only 6 years old but has a 529 plan, report them both under the parents’ net worth investments.

Whole Story at TFX.

Apr 22

The Complications of Retirement Taxes

by julie

Retirement should be simple. Unfortunately, tax issues, even in retirement, persist.

While you might think that taxes will get easier when you retire since you don’t have a regular paycheck any longer, the IRS will still be interested in you. With the many different kinds of income a person receives in retirement, it is common for taxes to actually get more complicated.

Some income sources will be fully taxable, others will be tax exempt, and others could be a mix of both. As you ride off into the sunset, make sure you understand the taxable status of your various income sources and plan accordingly to keep your tax bill as low as possible.

Social Security

Ever since the days FDR and the New Deal, most retired people in the United States receive Social Security benefits. On a standalone basis, Social Security benefits are not normally subject to income tax. But, there are situations that will cause Social Security to become taxable.

There is a taxation threshold for Social Security benefits that, if exceeded, will cause part of your benefits to become taxable. You can get a better idea of how much is taxable by using the IRS worksheet designed for that purpose. Typically, income like interest, dividends, tax-deferred distributions from retirement accounts, taxable pensions, rental property income, wages, and annuities will affect the taxability of Social Security benefits.

Please see https://www.taxesforexpats.com/we-help/retirees-abroad.html#229

Whole Story at TFX.

Apr 18

Seven Roth IRA Requirements You Need to Know in 2017

by julie

1. Limits for Contributions Did Not Change

Individuals can contribute a maximum of USD 5,500, which did not change compared to 2016. Participants at least 50 years old can still contribute a maximum of USD 6,500 – commonly called a “catch up contribution.” Also remember that you can make IRA contributions until the tax due date in the next year.

The following table shows the contribution maximums in previous years.

CONTRIBUTION YEAR 49 & UNDER 50 & OVER (CATCH UP)
2009 USD 5,000 USD 6,000
2010 USD 5,000 USD 6,000
2011 USD 5,000 USD 6,000
2012 USD 5,000 USD 6,000
2013 USD 5,500 USD 6,500
2014 USD 5.500 USD 6,500
2015 USD 5.500 USD 6,500
2016 USD 5.500 USD 6,500

 2. Income Limits For Contribution Eligibility Have Increased

While contribution limits did not change, show that maximum income at which one can no longer make contributions has increased.

Married individuals filing separately, and who have been participating in their employer-sponsored plan will not see any changes in their phase-out amounts.

Whole Story at TFX.

Apr 16

Need more time to pay the IRS? Four tips to settle your bill

by julie

All taxpayers should file their tax return on time, even if they can’t pay what they owe. Filing on the extended due date is also counted as filing on time – provided that extension request was filed by the original due date of the return.

Most importantly – if you cannot file on time, file an extension to save you from potentially paying a failure to file penalty – this is the most onerous of penalties.

Even if an extension is filed then comes the all encompassing question – when is the payment of tax bill due? Does it get extended if you have filing due date properly extended? The answer is NO. For the most individuals tax payment is due by the original due date of the return regardless of the extension.

If you filed your tax return on time, you already made the most important step – declared your income. Now the IRS knows that you are aware of your tax bill.

Payment of the entire tax bill may be challenging, especially if you did not expect that bill this year would be higher than in previous years.

Whole Story at TFX.