Tax Tips for U.S. Americans Abroad
If you’re a US American abroad, then you probably know of the little known fact that you have to file and/or pay taxes once a year to the IRS. Yes, folks, IRS expat taxes are a real thing.
Perhaps you send your tax forms to professionals to take care of it, or manually fill them out yourself. But chances are, you are or will be transitioning to the “new age” of doing taxes for expats via online software. Yet within the variety available, which is the best US tax software for expats in fact?
Especially in this day and age with information overload and fake news, shuffling through all the expat tax online software options available can be a lot to figure out.
Today we’re going to tell you to not worry. How to file taxes while living abroad and which online software to use will finally be answered. We’ll walk you through the top expat tax software solutions – plus our own – to see who and what really stacks up.
TurboTax is designed specifically for US taxpayers living and working in America. This means that their support for US Expats is limited because they are “Tax Prep USA Support.” So questions like “how to pay us taxes from abroad” may be tricky for TurboTax to answer.
The first form TurboTax has available is Form 2555, also known as Foreign Earned Income Exclusion (FEIE), which allows you to exclude a certain amount of foreign earned income from any US tax. As presented in our recent post, for this tax year (2018), you can exclude up to $103,900.
Turbotax Foreign Earned Income Exclusion is available, however, to claim it, you will need to do a lot of prep work yourself before the software will jump in, such as:
- Determine which Form 2555 test you qualify under
- Calculate the duration for of your qualifying time abroad
- Convert your foreign earned income to USD yourself
The second expat tax form that this software only allows in its software is Form 1116, which allows expats to use their foreign income taxes paid as a Turbotax foreign tax credit on their US tax return.
The Turbotax US software does NOT offer Form 8833 for Treaty Based Disclosures, which is critical for expats. Rather, TurboTax will tell you to download Form 8833 yourself, fill it out and attach it to your prepared tax return. After, you’ll need to mail the papers in and pay for postage.
Additionally, TurboTax does not offer Form 8621 for Passive Investment Company reporting requirements. This is if you are a direct or indirect shareholder of a passive foreign investment company. US Expats who have foreign mutual funds or other types of interest in foreign passive investment companies will need to use Form 8621 to report their
As a US expat using TurboTax, you normally have to use the Premier Edition for $79.99, which will only cover the federal return. However, if you are self-employed, you automatically will need to use the $119.99 version.
TurboTax does not offer the FBAR. As explained in this post, The Foreign Bank Account Report is a form that you as a US American abroad are required to fill out if you have a bank (or any other financial) account established overseas. You won’t be taxed on your foreign bank account because of this specific form. It is informational only, however, the fines for not filing this form can be up to $10,000.
Many US expats try to stick with Turbotax. Yet when they move abroad, they find out that the popular tax software isn’t necessarily ideal for their international situation. A new moving abroad tax return online software is required to fit the needs of US Americans abroad. Want to know what it is? Check out the expatriate tax returns reviews in the next sections below.
Like TurboTax, TaxAct is “tax software USA” and does support forms 2555 and 1116. However, with this tax software, you as a US expat will need to know how to find these forms within their software. Finding the forms include shuffling around through the program with sweats of frustration, which for many expats, they don’t have time for.
For example, to use the Form 1116 to claim Foreign Taxes Paid, you would need to, essentially do it yourself and know to choose this option either with the Form 2555 or over the Form 1116.
- Click Manual Input Worksheet to enter the information … which will populate the Forms 1116 in your return.
- Determine which category of income you are claiming
- Enter the amount of income in USD
- Define the type of income
- Calculate the foreign taxes paid or accrued in USD
Similarly to TurboTax, TaxAct does not support Forms 8833 and 8621. As a quick reminder, Form 8833 is for Treaty Based Disclosures, and 8621 for Passive Investment Company reporting requirements.
US Expat users of TaxAct will need to use the Premier+ Version, which starts at $57.95. TaxAct cannot electronically the FBAR on your behalf.
TaxAct, normally the more “affor
To be honest, if the popular tax software for US tax returns worked well for US Expats, we wouldn’t have built MyExpatTaxes from scratch. Our US Expat Tax Software is only for US Expats, making the process for Americans Abroad as easy as possible. Most of our expats finish filing their taxes in less than 30 minutes.
Thus, filing US taxes from UK and beyond got a whole lot simpler.
US Expats just need to fill out some basic information (nothing complicated) such as where do you work abroad, how long have you been abroad, and what type of income sources you have. From there we will determine the best expat tax benefits and forms for you to use on your return including:
- Form 2555: Foreign Earned Income Exclusion
- Form 8833: Tax Treaty Disclosure
- Foreign Bank Account Report (FBAR)
- Form 1116: Foreign Tax Credit
- Form 8938: Statement of Specified Foreign Financial Assets (FATCA)
- Form 8621: PFIC Forms, including instant QEF Elections* (*coming tax season 2019!)
Price-wise, we are the pricier tax software at first glance, but in the end a very affordable solution. For the federal US tax return and FBAR, we charge a flat rate of 149 Euro already, including all applicable sales tax. Our special software includes online expat tax filing and such great customer support that we were awarded the “Best US Expat Tax Management Platform of 2019.”
You don’t need an address to send US tax return from abroad. Once you complete the process through our software, we’ll print out and send all the forms needed to the IRS. It’s that awesome, and we also take a lot of unnecessary time away from you.
Additionally, we at MyExpatTaxes also assist in providing tax guides to answer the big questions. For example, we encounter questions like “How to pay US taxes while living abroad” or anything related to “American working abroad taxes” on a daily basis.
Results for Best US Tax Software for Expats
Obviously, we cannot unbiasedly judge the best US Expat Tax Software for Expats. However, we are passionate behind our MyExpatTaxes expat tax software…
However, we believe our clients’ reviews can provide some perspective:
As an expat working in Canada, it seems like preparing my US tax return should be simple. But I’ve often struggled to fit my situation into the awkward questionnaires from the Big Tax Software firms: how to handle investment income, self-employment income, my non-US spouse, or the ever-vexing residence requirements? MyExpatTaxes’s questionnaire was easy to understand, a breeze to answer, and the customized service and follow-up was outstanding. With TurboTax, I showed a balance owing several times as big as MyExpatTaxes’ flat fee; the same return prepared with MyExpatTaxes showed a small refund.Matt, US Expat in Canada
The easiest and most economical solution for tax preparation. Extremely competent and friendly service. I will definitely return to have my 2018 taxes prepared. Highly recommended!Shannon, US Expat in Austria
MyExpatTaxes mademy life as a US citizen living abroad so much simpler. It only tookme about 15 minutes to fill out the easy-to-understand online questionnaire. I also received my completed tax forms to review the next day.
The friendly staff also replied promptly to all the questions I had along the way. And the price is more than reasonable!
I strongly recommend this service to any US expats looking to save themselves plenty of time and hassle.– Jason, US Expat in Spain
Paying taxes abroad, and the US expatriate tax system is two topics expats tend to Google when they realize their obligation to the IRS. But at the end of the day, filing US expat taxes already seems unnecessary. We are all in the fight for residence-based taxation. So, why not use a US tax return software that makes it as simple as possible to file from abroad?
We at MyExpatTaxes are a working abroad tax software company has all the tax forms for US citizens living abroad. Plus we have some exciting developments for foreign expats in the coming months. Stay tuned!
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