What US Expats Need to Know About Paying Taxes


The prevailing opinion considering taxes and American expatriates is that there is no need to worry about paying any more dues to the government. However, the matter is not that simple, and it is vital that you understand exactly the facts concerning the matter to keep yourself from getting into any legal complications.

The following are the facts involving the Internal Revenue Service and the tax liabilities of an American expat:

The Foreign Earned Income Exclusion

This of course, refers to any amount that you may have, or have earned from working in another country besides the US. It includes not just your salary but also any allowance that you may receive as compensation.

To avail of the income exclusion, you must meet the following requirements: the first is that you must have lived in that foreign country for at least full year, or have spent at least 330 days from a 12 month period. The amount that you can take advantage of can reach up to $80,000. You must, however, file all the necessary papers to the IRS to be a part of this program.

Expats and Self Employment Tax / the US Social security and Medicare

If you are an expatriate who is employed by a company in the United Sates, it is almost always the case that your employer will hold back any Meficare or Social Security.

For those that are their own employers (self employed in other words), you will need to pay up to whatever amount you owe the revenue service. Moreover, there is a self employment tax that you will have to pay so that you will be entitled to both Social Security and Medicare.

American Expats Employed by Foreigners

If you are working for a corporation in another country, you will not, except in special cases, pay anything to the Internal Revenue Service with respect to your Social Security, and instead will be covered by that country’s own laws concerning taxation.

Facts about Tax Treaties

If the country you are in has a tax treaty with the United States, then it is possible that you might have to pay some to the IRS. Currently the US has tax treaties with 60 other nations, and it is therefore crucial that you check if you are covered by this rule.

There are several online resources you can check for information concerning this subject, but the best and most reliable place to begin would be at the official website of the Internal Revenue Service, http://www.irs.gov. .

Double Taxation and Foreign Tax Credits

Because of international agreements it is very possible that you will end up paying a form of double taxation (i.e., paying both the United States and the country you are in right now).

While double taxation may be in cases unavoidable there are tax credits that can alleviate some of the costs. Be sure to conduct some research regarding any tax credits that might be available in your area.

Expat Tax Consultation Firms

Given the intricacy of tax issues, doing research in both US and foreign country taxation can be hard; the best thing to do is hire a firm to help sort out the issue. While they may be expensive, you mgiht be able to save a considerable amount if you know and exercise all your options.


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