What Taxes Must a US Citizen Pay and When are They Due?
According to the IRS, all Americans or US citizens who live or work overseas, including the military, must pay tax on their US income.
Many Americans will choose to work overseas for monetary gains but they will be subject to US tax laws regardless if they do not use any American services such as schools, churches or social services. The IRS has specific guidelines to follow. America is the only country that taxes its citizens on both incomes.
Tax Advice for Americans Living Overseas
According to Nick Hodges, CPA of the expatexchange.com, "While the expat experience can be an exciting an exhilarating adventure, there is no greater frustration and disappointment than having the IRS ruin your experience by auditing your tax return while away, calculating additional taxes due, penalizing and charging you interest during the process, and even perhaps suggesting jail time for your mistakes."
- Foreign income tax avoidance can only be claimed when the US citizen files form 2555. If the form is not filed, the taxpayer may not take the exemption.
- Any taxpayer who has $10,000 or more in a bank overseas must report that bank to the IRS or face penalty and prosecution.
- To take advantage of the foreign tax credit, the taxpayer should fill out form 1116. The tax credit may not be taken on income excluded from tax.
- It is advisable that anyone doing their taxes overseas not rely on a local CPA, but a CPA with knowledge and references. Look for someone that can be contacted in five years from now.
How to Get Answers to Tax Questions From the IRS
The Philadelphia, Pennsylvania IRS office will answer any questions the expat or American living overseas may have. The office hours are Monday through Friday 6am - 11 pm EST. Here are their contact numbers and address:
Phone number: 215-526-2000
Fax number: 215-516-2555
Email: Tax questions answered here and form
Mail: Internal Revenue Service
P.O. Box 920
Bensalem, PA 19020
Note: The IRS also has personnel at many Embassies and Consulates abroad to include:
Germany, England France and China. The taxpayer should read up on the official website to get their address and phone numbers here.
Tax Advice and the Location of Expat Services
Many Americans who live abroad and work there are also called expats. If the American is living abroad and working, they still must file a tax return with the IRS. Americans must claim both incomes in this case and may not have to pay state tax if they are legally residing in another country with a dual nationality.
According to taxback.com, "You may be required to file a separate US state return even if you have no income from any of the states in the US. Whether or not you need to file a state tax return depends on particular state."
To fully understand all the legalities of expat taxing, it is best to contact a CPA. The following is a list of companies who handle expat taxes and fall into the expat services category:
When to File Taxes and Extension Information
For Americans who work, live or who are in the military, an automatic extension of two months is given. If the taxpayer needs a further extension, they may use form 4688 and get an extension till October 15th. The tax however is due on or before April 15th or interest will be applied to the amount owed.
Any tax payment made after June 15th would be subject to both interest and late penalties.
Where Do Americans Living Abroad File Their Taxes?
For Americans or US citizens living abroad, the following address are used to mail in the tax returns.
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
To mail in estimated tax payments including form 1040-ES use this address:
Internal Revenue Service
PO Box 660406
Dallas, TX 75266-0406
US citizens living abroad may not file electronically and need to send their returns by mail.