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The US tax deadline is approaching: The Local’s readers save 10% on this trusted software

Founding Father Benjamin Franklin was onto something when he wrote in 1789, ‘In this world, nothing is certain except death and taxes’. Well, one thing is for certain, the tax deadline of June 15th for US citizens abroad is fast approaching!

The US tax deadline is approaching: The Local's readers save 10% on this trusted software
Taxed by taxes? Nathalie Goldstein from MyExpatTaxes is here to answer your questions. Photo: Getty Images

The Internal Revenue Service does an extremely good job of making sure that Americans pay their taxes, including those living abroad.

Unlike some countries, the United States requires the vast majority of its citizens living abroad to file a tax return each year.

As complicated and time-consuming a process as completing a tax return can be normally, it can be even more complex and frustrating when foreign assets, property ownership and marital status enter the equation.

With the deadline for US citizens abroad approaching in mid-June, The Local asked Nathalie Goldstein, CEO of tax preparation software company MyExpatTaxes, some of the most common questions internationals have about their 2021 return.

Tax Basics

You will probably have filed a tax return before as a US citizen. However, you may be approaching your first tax deadline as a US citizen abroad. Here are a few things you need to know.

Who is obligated to file a US tax return?

“Americans and US Green Card holders whose income reaches the minimum income threshold regardless of where they live. This starts at $5 for those who are married to non US citizens and opt to file as Married Filing Separately.”

What are the likely consequences, should I miss filing a return?

“If you owe US taxes you will be charged penalties and interest on any unpaid amounts. Additionally the US could revoke your passport for failing to report your income if you owe more than $50,000 in unpaid taxes.”

Do I really get to file my tax return later than the April deadline as a US citizen living abroad? Do I need to request special permission for this extension?

“Yes. Anyone who is living outside the United States at the time of the tax deadline has until June 15th to file their tax return. You won’t need to request an extension but you will need to include a statement explaining why you qualify for the expat tax deadline. MyExpatTaxes automatically includes the statement when you file with us.

“However, if you will need to pay US taxes (which most Americans abroad won’t), you still need to pay by the April deadline.”

What are the types of documentation and records I should have ready when I start doing my taxes?

“You’ll need your income statements from the previous tax year (the one you are filing), as well as any deductions you plan to claim. You’ll also need your Social Security number, employer information, and your basic info such as birthdate and address.”

I am married to a non-US citizen. Do I file married – jointly or separately – or single?

“Most expats living in a foreign country will probably want to file as Married Filing Separately. Using this filing status keeps your spouse’s income out of the equation altogether.

“If you do file as Married Filing Separately, the minimum income threshold for filing a tax return is just $5. So make sure you file your return, even if you work just part-time or very minimally.”

How do I find the right exchange rates to use to convert my wages in my local currency to US dollars?

“The IRS posts the average annual exchange rates of several countries on their website. However, it’s not required to use these rates. If the rate is a publicly posted rate, simply select the rate which suits your specific situation the best.”

 

Overseas income and property

If you are living overseas as a US citizen, odds are that you earn a salary, or may even own property in your adopted country. This may have some impact on your tax return, depending on the nature of the income and property.

Am I supposed to pay any additional taxes to the US on my overseas income? What about retirement savings accounts and/or investment accounts where I currently live?

“Actually, it’s quite the opposite. You can use the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) to help you avoid paying any US taxes at all. The FEIE allows you to exclude around $100,000 of your foreign earned income (such as salary or self-employment income) from your tax return – meaning you won’t pay anything to the IRS for that income.

“Additionally, you may also get credit for any taxes paid to your resident country. This is why we say most Americans won’t pay US taxes – they just have to file! Of course if you don’t pay local taxes on passive income streams like investment accounts, then you might owe some tax to the US.”

Does owning property overseas have an impact on my US tax return? What should I know before buying, tax-wise?

“Owning property overseas is no different tax-wise than owning property in the US. When you rent or sell your property, you will need to report that income.

“For those selling property, if you qualify for it being your main home (you lived in and owned it for 2 of the last 5 years), you might be eligible to exclude up to $250,000 of the sale profit per taxpayer from your US tax return.”

Confused by what foreign income you need to declare on your US taxes? Receive a 10% discount at checkout with the discount code ‘TheLocal10’

Pandemic stimulus payments and taxes

Many US citizens were eligible for stimulus payments, released by the US government in response to the coronavirus pandemic that began in 2020. These may have some implications on the taxes you need to pay.

Will the pandemic and distribution of stimulus checks impact my tax return?

“There are a few ways the economic stimulus payments could affect your return:

  • If you didn’t file for the last few years, it’s not too late to claim your stimulus payments.
    – Assuming you owe less than the amount of the payments, you’ll receive any additional sum as a refund.
    – If you had a child in 2021 and get their SSN by October 15, 2022 (assuming you filed an extension), you can claim the latest $1,400 stimulus payment for them.
  • If you are a parent who received advanced child tax credit payments in 2021
    – If you, like me, use a US address when filing your taxes abroad, it’s possible you have received more in advance payments than you will qualify for. Since Americans abroad are only eligible for $1,400 per child (not the potential $3,600 that US residents can claim), if you received more than you were eligible for, you’ll need to pay this back when you file your taxes.
    – If you received the correct sum, or nothing at all, you will receive any remaining portion as a tax refund.”
No more taxing times – MyExpatTaxes makes filing easy. Photo: Getty Images

Reporting foreign accounts

US citizens are obliged under the law to declare assets in overseas accounts, over a set amount, in order to track funds and monitor and hinder tax avoidance. Come tax time, it’s important that you declare your accounts if they exceed the limit.

What is an FBAR and why is it necessary to file it?

“The FBAR or Report of Foreign Bank and Financial Accounts, is how the FinCEN (The Financial Crimes Enforcement Network) keeps tabs on US citizens who have money (and how much) in foreign accounts. Anyone who has more than $10,000 max combined in all their foreign financial accounts at any time throughout the tax year will need to file an FBAR.

“Things to note about the $10,000 limit: You need to add the sum of ALL of your foreign accounts. If the sum reached is over the limit, you need to file an FBAR.

“If your accounts are in a foreign currency, you’ll need to make sure you are converting the currency amounts to USD. MyExpatTaxes includes the FBAR for no additional charge – because we understand this is an essential form for expats like myself.”

Do joint accounts count towards the $10k combined total?

“Yes, you will need to include the entire sum of any account with your name on it or that you have signature authority over. For example, joint bank accounts, children’s accounts, and business accounts.”

When is the FBAR due? Do I need to request permission if I don’t send it in by the regular tax deadline in April?

“The FBAR is due April 15th. There is an automatic extension to October 15th. You don’t need to do anything to request the extension (except include a statement!)”

Do the FBAR and my income tax return need to be filed at the same time?

“It’s generally easiest to file them at the same time, but since your tax return is sent to the IRS and the FBAR is sent to FinCEN, you’re not required to complete them simultaneously.

“Again, this is where MyExpatTaxes can really help. Since your information is already in the software you just need to add the extra bits needed for the FBAR. We’ll send them both off to the right agencies for you!”

Seeking professional help

You can do your own taxes as a US citizen abroad, but there are some tools that can assist you.

What are the benefits of using a software program over using an accountant?

“I started MyExpatTaxes because of the frustration I felt with the accountant I used to help me with my expat taxes. At the time, there was no software offering a do-it-yourself solution that specifically addressed expat issues, such as the FBAR being automatically included or even the ability to e-file.

“Most tax software requires expats to print their return and mail it to Austin, Texas, which can be time consuming, costly, and hard to track. At MyExpatTaxes we can e-file 99% of tax returns, the majority of which are accepted by the IRS in a matter of hours, not days or weeks.

“Also, if you want to work with an accountant and have the speed and convenience of expat tax software, we offer both. You can opt to have a tax professional review your return at the end or have a video call with one immediately before you start. MyExpatTaxes offers you every filing experience you could want: do-it-all-yourself, do-some-of-it-yourself, or get-it-done-for-you.”

Take the stress out of filing your US tax return. Discover how MyExpatTaxes can make filing your return simple, no matter what your circumstances. Receive a 10% discount at checkout with code ‘TheLocal10’

Member comments

  1. For the first time I had to file my US return as an expat. I was very fortunate to find someone who is not only capable of preparing the US return, but also the French return as well. The returns were both filed on-time and were well prepared. The cost was in line with what I had paid when I lived in the US. There are good tax preparers out there and the cost can be reasonable — if you do your “homework” and provide clear information.

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READER QUESTIONS

Why some Brits in France are facing bigger tax bills since Brexit

Over the summer people living in France have received their tax bills, and some Brits who are residents here will have noticed that their bill is larger than usual - here's why.

Why some Brits in France are facing bigger tax bills since Brexit

Brits who live in France and make a tax declaration here, but have income from the UK, may have noticed that their tax bill has increased this year – here’s why and whether you can challenge the increase. 

Brexit

Yes, this is Brexit related and it refers to social charges on non-French income. The standard rate for these charges are 7.5 percent for income from an EU country and 17.2 percent for income from a non-EU country.

The tax bills received over the summer relate to the annual French tax declaration filed in April 2022, covering the 2021 tax year. In other words, the first year after the end of the Brexit transition period.

Social charges

Social charges are levies with a social purpose introduced in France in the 1990s to finance the country’s complex social security system.

If you have a French payslip you will already be familiar with them, and they actually make up the bulk of deductions from salaries, significantly more than income tax.

READ ALSO How to understand your French payslip

One of the big questions is whether France’s social charges are actually a ‘tax’ – the government repeatedly insists they’re not, for all that they look like a tax and are paid like a tax. 

The position on French social charges has changed several times in recent years, sometimes in response to court action all centred on whether this money that government deducts from your income can be called a ‘tax’ or not.

Katey Murray, at The Spectrum IFA Group, explained: “Article 29 of the amended Finance law of 2012 extended social charges to rental income from French properties and capital gains on properties for people who are not French tax resident.

“In 2015, a Dutch national challenged the fact that he was paying social charges in France and social security contributions in the Netherlands. The case went before the ECJ, which ruled these levies were similar to social security contributions and therefore contrary to European law.”

France’s highest administrative court, the Conseil d’Etat, confirmed the ECJ’s ruling. “French tax offices then, if a claim was made to them, reimbursed undue social charges,” Murray said.

“However, the French Government stated that these claims could only be made by someone covered for their healthcare by the system of another European country (EU, EEA or Switzerland) and not someone covered by a non-European health system. 

“This was confirmed by the ECJ for a French national living in China in a case in January 2018.”

Foreigners in France

And it’s this ‘healthcare system’ distinction that has become the key detail for Brits in France, clarified by a court ruling from March 2022 on the details of the Brexit Withdrawal Agreement. 

Social charges are currently set at 7.5 percent for income from an EU country, or 17.2 percent for income from a non-EU country. So income from the UK jumped to the higher rate at the end of the Brexit transition period.

However the ECJ ruling on healthcare cover is the key bit – essentially if you are already contributing to another European country’s social security system, you benefit from the lower rate.

This mainly affects two groups – Brits living in the UK (and therefore covered by the NHS) who have income in France, and Brits who are living in France and who have an S1, which states that their healthcare costs are covered by the NHS.

S1 holders are mainly British pensioners living in France, but the scheme can also apply to other groups including students and posted workers. 

Brits who are living in France and are covered by the French health system pay the higher rate on income from the UK. 

Technically the 7.5 percent rate is a ‘social levy’ rather than the prélèvements sociaux.

The ‘social levy’ is not charged on pensions, so if you are an S1 holder who receives a British pension, you will not have to pay any social charges at all, while certain types of property income may also be exempt from social charges.

Tax

As we stated above, social charges are not a tax (although they are deducted from your income by the tax office).

Taxes on income from the UK is covered by the bilateral dual-taxation treaty between France and the UK, which states that you don’t have to pay tax in France on income that you have already paid tax on in the UK. 

So the first thing to check on your tax bill is whether deductions relate to impôt (tax) or prélèvements sociaux (social charges).

Challenge your tax bill

So what to do if you think you have been incorrectly charged on income from the UK?

If you are an S1 holder, it’s a case of telling the tax office that you benefit from the lower 7.5 percent social levy, rather than the 17.2 percent social charge.

Murray said: “You can state that you are not subject to social charges by ticking boxes 8SH/8SI on your tax form (2042 form) or, if you have been charged at the higher rate, you can claim them back on your personal page on the impots.gouv.fr website.”

If the over-charge relates to a different issue – for example you have been charged both tax and the social charge or charged on exempt income – your first step is talking to the tax office, either in person or over the phone.

READ ALSO How to challenge your French tax bill

This article is a general overview of the tax rules and is not intended as a substitute for financial advice, if your financial affairs are complicated you are always better off getting professional help from an accountant who specialises in international taxation.

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