Beyond 1040 – What Else Do American Expats Have to Report With Their Taxes? (Part I)
By Marian T. Wellman, EA, RIA
Income taxes in the United States can be complicated and extremely difficult to navigate, and leaving the country does not mean leaving the tax forms behind. Most countries around the world do not require non-residents to file income tax paperwork. The US is somewhat unique. United States citizens are required to file income taxes no matter where they live. The basic income tax form is the 1040, but there are many other forms that may be required depending on income level, business interests, bank accounts, and a variety of other factors.
American expatriates can safely assume they need to file income taxes with the US, unless their income is below a certain level. To calculate the minimum income, find the amount of the standard deduction and add the amount for one exemption. In 2010 any American citizen who earned more than $9,350 needed to file a tax return. Anyone who earned less than this amount but was self-employed or sold stocks will probably also need to file a tax return.
The US requires all of its citizens to file income taxes, and considers anyone born on US soil and anyone who has one parent with citizenship to be a citizen. This means that there are people who were born in other countries and have never set foot in the US, but are still considered citizens with a duty to file tax forms. It is important to note that a duty to file tax forms is not a requirement to pay taxes. Green-card holders are also required to file taxes with the US
For those actually working and receiving a salary or who have a business outside the US, one of the basic forms is the 2555, the Foreign Earned Income Exclusion form. (Retirement income, pension, rentals, interest or dividends are handled differently.) This is filed along with the regular 1040 income tax form and allows taxpayers to exclude income earned in foreign countries. However, not all foreign income is excluded and the Internal Revenue Service has the right to deny the foreign income exclusion if the paperwork is not filed on time. Those who do not owe taxes get an automatic extension, allowing them until June 15th to file their taxes on time. Those who owe money must either pay the IRS or request a formal extension by April 15th.
Marian T. Wellman of has an MBA in Finance and is an Enrolled Agent and Registered Investment Advisor. She has been preparing taxes for over 25 years, 8 of those in Mexico. She can be reached via her website.