If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.
If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are subject to the same reporting requirements, such as submission of an annual tax return. However, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension. For a calendar year return, the automatic 2-month extension is to June 15.
If you are unable to file your return by the automatic 2-month extension date, you can request an additional extension to October 15 by filing Form 4868 before the automatic 2-month extension date. However, any tax due payments made after June 15 will be subject to both interest charges and failure to pay penalties.
In filing your U.S. tax return, you should make note of any applicable Double Tax Treaty entered by the U.S. and the country of your residence. This will provide guidance on taxation of certain kinds of income. Moreover, even if none of the provisions of the Double Tax Treaty apply to your situation, or there is no Double Tax Treaty in place, you still can still be eligible for certain credits and exclusions, such as the foreign earned income credit, housing and moving expenses and a number of other credits and exclusions.
The foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction are based on foreign earned income. For this purpose, foreign earned income is income you receive for services you perform in a foreign country during a period your tax home is in a foreign country and during which you meet either the bona fide residence test or the physical presence test.
If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability. In most cases, it is to your advantage to take foreign income taxes as a tax credit.
Generally, the following four tests must be met for any foreign tax to qualify for the credit:
- The tax must be imposed on you
- You must have paid or accrued the tax
- The tax must be the legal and actual foreign tax liability
- The tax must be an income tax (or a tax in lieu of an income tax)
In addition to the foreign earned income exclusion, you can also claim an exclusion or a deduction from gross income for your housing amount if your tax home is in a foreign country and you qualify for the exclusions and deduction under either the bona fide residence test (you are a U.S. citizen, or a U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect) or the physical presence test (you meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months). The housing exclusion applies only to amounts considered paid for with employer-provided amounts, which includes any amounts paid to you or paid or incurred on your behalf by your employer that are taxable foreign earned income to you for the year (without regard to the foreign earned income exclusion). The housing deduction applies only to amounts paid for with self-employment earnings. Housing expenses include your reasonable expenses actually paid or incurred for housing in a foreign country for you and (if they lived with you) for your spouse and dependents.
The exclusions, deductions and credits described above are subject to a number of exceptions, calculations, guides and provisions. In order to determine which deductions, exclusions and credits may be utilized in your particular situation, it is crucial to receive professional advice. The tax attorneys of the Law Offices of Daria S Brovchenko have extensive experience with U.S. taxation of its citizens and green card holders residing abroad and the requisite tax treaties (including specifically, Russia, former Soviet Republics and a variety of European counties) and can provide professional guidance even in the most convoluted matters.
Please contact the Law Offices of Daria S Brovchenko to speak with a tax attorney.
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The Law Offices of Daria S. Brovchenko are located in San Diego, CA. We represent clients throughout Southern California including, San Diego, Los Angeles, Poway, Vista, Chula Vista, El Cajon, Coronado, La Jolla, Pacific Beach, Oceanside, Carlsbad, Encinitas, Escondido, Rancho Bernardo, Del Mar, Solana Beach, Scripps Ranch, La Mesa, Lakeside, Eastlake, Bonita, Anaheim, Santa Ana, Newport Beach, San Diego County, Orange County and Riverside County. We also represent clients globally, including Russia, China, Italy, Japan, Brazil and Mexico.