What Else Do American Expats Have to Report With Their Taxes? (Part II)
By Marian T. Wellman, EA, RIA
If you are an American citizen living abroad, or a green-card holder, you probably already know that you need to file income taxes with the United States. The standard forms is the 1040, but the IRS may also require other forms such as the 2555 Foreign Income Exclusion form depending on salary, business interests, bank accounts, and a variety of financial circumstances. The newest tax form that expatriates need to know about is Form 8938, the Statement of Specified Foreign Financial Assets. Anyone with foreign assets totaling $50,000 USD or more may need to include Form 8938 with their tax return. Another form that often takes expats by surprise is form 3520, for declaring properties held in trust.
Many citizens living abroad already know about the Foreign Bank Account Report (TDF 90-22.1), which is required for anyone who has had a total of $10,000 USD in non-US bank accounts, securities, annuities, and other accounts. However, some people may not realize that the requirement uses the highest value of all accounts in aggregate. Others may not know that the form uses all foreign bank accounts over which the citizen has signatory power, including corporate accounts, charity accounts, and joint accounts. The Foreign Bank Account Report must be filed separate from the 1040 tax return and sent to a different address. Those with any type of foreign account should also be sure to check the Interest and Dividends box on the Schedule B form.
One of the most complicated tax forms that expatriates may have to tackle is Form 5471, for Information Return of US Persons With Respect to Certain Foreign Corporations. This form should be filed with the 1040 tax return, and omitting it could result in a fine of $10,000. American citizens living abroad who run a business or form a corporation with anyone, from other US citizens to citizens of other nations, must file Form 5471 with their US tax return if their business required a tax return in their country of residence. Form 5471 is notoriously difficult to fill out because the foreign corporation usually uses different currency and accounting rules.
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.