The payment of Federal tax for non-residents is mandatory for all the expats even if they do not live in USA.
Generally, all the US citizens and green card holders are required to file and pay their federal taxes to the IRS on the income earned by them at any part of the world, regardless of where they live. This means an US expat even if they reside outside the United States are still subject to US Tax laws.
However, the IRS has certain provision to help the expats avoid double taxation and to address tax issues. The Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit are the two common mechanisms used to reduce the impact of US taxes on the income earned abroad. These provisions can reduce or eliminate the US tax liability for income that is earned and the taxed in foreign country.
The expats have to file their federal tax return with IRS if their annual worldwide income exceeds the below there limits-
- If the expat is single with income over US$ 13,850.
- If they are married to an American or a Green Card holder with joint income over US$ 27,700.
- If you are married to a non-American and your own total income is above US$ 5.
- If you are head of the household either married or divorced with US dependents with total income over US $ 20,800.
- If you are self-employed or have a freelance income during the year over US$ 400.
Forms required for filing Federal tax for non-residents
- Form 1040
- Form 8621 (PFIC)
- Form 5471
- Foreign Bank Account Report
- Form 8858
- Form 3520 and Form 3520-A
When to file US taxes from abroad?
Almost every adult American should be familiar with the standard tax filing deadline in the United States. The tax day falls in the mid of April, there are some circumstances that cause the IRS to push back the deadline.
Also IRS gives special considerations for filing federal tax for non-residents. They automatically get two month extension, pushing their effective filing deadline to mid-June in most cases. However, it is important to note that while late filing fines will not be assessed until after the automatic extension and the interest on any amount owed will begin to accumulate starting on Tax day, thus delay in filing returns could cause the USA expats money.
How to file taxes online while living abroad?
Expats can file their federal income tax returns online. IRS has online tax filing service that allows certain tax payers to prepare and submit their tax returns online. Furthermore the expats can collaborate with a dedicated expat tax service provider who will help them file their expat taxes returns on time.
What will happen if expats do not file their federal tax returns with the IRS?
Expats who do not submit their annual tax returns to IRS by deadline or fail to file their taxes before automatic two month filing deadline extension will have to pay fines to the IRS. Initial fines for late filing are 5% of the taxes owed that can increase up to 25%. Expats who still remain ignorant of their tax liabilities might be heavily penalized and could face criminal consequences for tax evasion.
Collaborate with a dedicated expat tax professional that will help you file your federal taxes with the IRS on time so that you do not have to pay huge fines and penalties.
Also Read:- Navigating the Complexities of Federal Tax Laws for Non-Residents