It’s true that every American abroad, regardless of where they live in the world, has the obligation to pay and file worldwide income to the IRS every year. However, what may not be so explicitly stated or known – through US passports and online – are filing thresholds. Filing a tax return with no income as an American abroad is possible though.
Filing US expat taxes in general is only necessary if you went past a certain monetary threshold on the IRS filing status chart. Americans abroad receive an automatic 2-month extension to file US taxes by June 15th, but if you owe taxes, April 15th is the deadline.
Yet, you as an American abroad are allowed to skip a tax return only if you have minimal or no income. However, it is suggested, to be safe and remain in good standing with the IRS, to legally file a tax return, even if you have no income. Why? We’ll explain more on that here.
Income Filing Requirements
Whether you’ve earned this year or last year – if it falls below the IRS filing threshold, you don’t need to file a tax return. Each income filing threshold minimum varies according to your filing status and age. This is also determined by whether you’re the head of household, married, single, or if you can be claimed as a dependent on someone else’s tax return.
Something to be aware of is that every year the IRS adjusts the filing minimum amount of earned income every year. This is due to inflation that naturally happens every tax season.
If you have no income, you do not have to file a tax return. However, since the tax threshold minimum changes every year, it’s important to be up to date to make sure you’re still in the clear to not file. You can play it safe and still file a return with us at MyExpatTaxes if it makes you more comfortable.
To see if you need to file, check out the filing threshold for tax season 2022 in the year 2023 from our blog post 5 Things to Prepare US Taxes as an American abroad.
Americans abroad can file until June 15th, or request an extension to file until October 15th.
Filing the FBAR
Maybe you are not receiving any income, lost your job, or not working currently, but if you do have more than $10,000 in total of all foreign bank accounts you own (or have signature authority over), you will need to file for an FBAR – which is not a tax return.
The FBAR stands for Report of Foreign Bank and Financial Accounts and is extremely important to fill out so the US knows there is no illegal activity going on.
A foreign financial account is any bank located outside of the US, pension funds, foreign life insurance policies with cash values, and foreign mutual funds. If you need help calculating and reporting your bank account to avoid penalties by the IRS, hop onto the app and we’ll take care of the rest.
Other Reasons Why You Might Need to File
If you owe any special taxes to the IRS, you will need to file a tax return. Perhaps you may owe particular tax to a qualified retirement plan, like an individual IRA account.
In other cases, you may need to file to exempt certain income from US taxation, such as foreign pensions or social security benefits.
If you are self-employed, you’ll need to file and pay self-employment tax if your net earnings are at least $400.
Identify Fraud and Theft
If you believe or were a victim of identity theft over the past tax year, filing a return can help. The IRS can put you on notice as to what your real personal information is, and true income was for the year. Doing so prevents thieves from filing a fake tax return, and using your name and social security number if it gets to that extent.
You may want to file a tax return if you want to see if you can receive a tax refund. Otherwise, the IRS will keep it for themselves.
A tax refund can only happen if you had any past taxes withheld from your income, like withholding wages or distributed retirement plans and overpaid your taxes, due to no tax being due (since income fell below the filing thresholds).
As an American expat, you are more likely to receive a tax refund that was withheld since you don’t have any tax liability. Especially if you are eligible for the FEIE, FTC and Child Tax Credit. Remember as an American parent abroad, you might be able to get up to $1,500 as a tax refund for every qualifying child under 17 with a US SSN.
Owing US Taxes, Back or State Taxes
If you find out you made it over the filing threshold, you need to file your US expat taxes. We suggest to do it through us at MyExpatTaxes. Our tax software guarantees you as a US citizen abroad will have a smooth, affordable experience. Plus, you’ll have a knowledgeable and helpful team by your side.
US Taxes Benefits
Additionally, once you make income, a percentage of that income naturally gets taxed. This from both the US and the country you are living in. While it may seem unfair, the US has put specific measures in place to prevent double taxation.
These are known as expat tax benefits:
- Foreign Earned Income Exclusion: This benefit gives US citizens the right to exclude $112,000 or less from foreign earned income.
- Foreign Tax Credit: This benefit gives US families abroad a refundable child tax credit of up to $1,500 per qualifying child. Plus, families can subtract their income tax amount from the foreign country’s amount to US tax.
- Tax Treaty Benefits: Check to see if your country has made an agreement with the US to prevent double taxation through the Totalization Agreements in respect to social security taxes. If you’re not sure, our software uses tax treaties and Form 8833 (Treaty-Based Return Position Disclosure).
Did you know it may be possible that you owe US state tax as an expat? This could be so, due to all states not recognizing the Foreign Earned Income Exclusion or Foreign Tax Credit expat benefits.
US Expats need to file state tax forms with their federal tax return if:
- They earned money working in that specific state temporarily
- Lived in the state for a part of the tax year
- Are still considered domiciled in that state
Secondly, you will have to review your state’s filing requirements since all US states have their own laws. You can check out our state guides to learn more. Or jump onto our software and a team member will assist you!
Filing Back Taxes
If you you missed out on a year or more of filing taxes, you can utilize the Streamlined Procedure. This is a program through our expat tax software, MyExpatTaxes. It helps you make up years of missed IRS tax forms, and get back on track.
The Streamlined Procedure is an amnesty program set up by the IRS to help Americans abroad become tax compliant. It also allows citizens to avoid hefty penalty fines of $10,000 or more.
MyExpatTaxes Can Support You
Need any more support when it comes to filing your US taxes? Our dedicated team of experts can answer your questions and assist you with where you need to go. The time to file a federal tax with us is here!