Below, we’ll tell you the basics of what you should know about U.S. taxes for digital nomads, including:

• Your U.S. tax responsibilities as a nomad
• How to get caught up on multiple years of back taxes
• Common digital nomad tax penalties and fines (and how to avoid them)
• Tax credits and benefits available to you
• Other financial reporting obligations you might have
• Additional tax considerations, like state taxes and non-U.S. taxes
• How to file your U.S. taxes online

Ready to file? No matter where in the world you are, H&R Block Expat Tax Services brings a tax expert right into your living room (or camper, or bungalow, or wherever you currently call home). Head on over to our Ways to File page to choose your journey and get started.

What digital nomads should know about filing U.S. taxes

1. Yes, American digital nomads must file U.S. taxes, even when working remotely abroad

The most common question we hear is, “Do digital nomads have to file U.S. taxes?”

Yes, if they make over the minimum amount required to file, digital nomads must file a U.S. tax return.

The U.S. taxes Americans based on citizenship, not place of residence. That means it doesn’t matter where you currently live — if you’re legally considered a U.S. citizen and make over the minimum amount of worldwide income, you have a tax obligation as a U.S. tax resident. This is true even if you earn no income within the U.S.

Taxable foreign income for digital nomads includes:

• Wages
• Interest
• Dividends
• Rental Income

Filing taxes as a digital nomad may seem difficult, but H&R Block makes it convenient no matter where in the world you are — whether you want to DIY your expat taxes or file with help from an advisor.

2. Remote workers can catch up on U.S. taxes with Offshore Streamlined Compliance Procedures

If you are a digital nomad and have never filed a U.S. tax return, you may be able to get caught up without being penalized.The IRS has a program to help mistakenly non-compliant filers get caught up penalty-free — Streamlined Foreign Offshore Procedures — which the Expat Tax Advisors here at H&R Block can happily help you with.

To qualify, you must:

1. Have lived in a foreign country for at least 330 days during one of the last three years and not maintained a U.S. abode.
2. Confirm that your failure to file U.S. tax returns and FBAR was not willful.

To catch up on past returns, get started with an Expat Tax Advisor now.

3. Not filing taxes as a digital nomad can result in steep penalties and fines

Trying to wiggle around your U.S. tax filing obligation has steep consequences — and it’s pretty easy to get caught. Thanks to FATCA, many financial institutions around the world exchange U.S. citizens’ financial account information with the U.S. government.

Expat tax penalties can range from a minor fine to penalties upwards of $10,000, and you can even lose your passport if you’re seriously out of compliance with tax regulations.

Bottom line: It’s worth it to file your U.S. taxes each year, even if you’re a digital nomad.

4. There are two tax benefits available to reduce digital nomads’ U.S. tax bill

Worried about paying too much in taxes? You’re in luck — digital nomads have two ways to lower their tax bill and avoid double-taxation: The Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC).

The FEIE excludes your foreign earned income from U.S. income tax, which lowers (or eliminates) your U.S. tax liability. As a digital nomad, you can qualify if you pass either the Bona Fide Residence test or the Physical Presence Test.

Another important tool for lowering your U.S. tax obligation is the FTC. The FTC gives you a dollar-for-dollar reduction of your U.S. tax liability per foreign taxes paid.

Get started on your U.S. taxes now.

5. Americans working overseas must track time carefully to claim certain tax benefits

If you’re a digital nomad, accurately tracking your time in each country will be the key to a smooth tax return. You need to have been on foreign soil for a certain number of full days (full = 24 full hours) to claim tax benefits like the FTC or the FEIE, and if you’re off by even 30 minutes you could be disqualified. For example, time spent on a 12-hour trans-oceanic flight may not count toward your full days because you’re technically in international airspace.

Correctly tracking hours in-country gets more complicated when you cross time zones. It’s worth it to get guidance from an international tax professional, like the ones at H&R Block Expat Tax Services.

6. Self-employed digital nomads may have to pay Social Security tax in the U.S.

If you’re self-employed outside the U.S., you’ll still owe U.S. self-employment tax on foreign earned income. This is true even if you’re able to claim the Foreign Earned Income Exclusion. However, Social Security Totalization Agreements between the United States and many foreign countries might prevent you from having to pay self-employment taxes in both countries.

There may be a problem for digital nomads moving from country to country because of the residency requirements of the totalization agreements — if you’re not taxed as a resident in another country, the totalization agreement will not apply. That’s why it’s worth it to have a tax professional handle the paperwork for you.

Bottom line, if you’re self-employed and not paying self-employment taxes as a resident in another country, you have to pay them in the U.S.

7. Americans (including digital nomads) may have financial reporting obligations in addition to filing U.S. taxes

As a digital nomad, you may have more paperwork to file other than your tax return — if you have a foreign bank account, you might also have to file your Foreign Bank Account Report (FBAR) and FATCA Form 8938.

This includes digital bank accounts. For digital bank accounts, you’d refer to the country the bank is registered in.

You’d file an FBAR (FinCEN Form 114) if the combined balance of all your foreign accounts was more than $10,000 at any point during the calendar year. For example, if you had a bank account in Hong Kong with a balance of $5,000 and an account in Singapore with another $6,000, your total balance in all foreign accounts would be more than $10,000 — meaning you’d have to file an FBAR.

You’d file FATCA Form 8938 if your total combined value of foreign assets is worth more than $300,000 at any time during the year (or at least $200,000 on the last day of the year). If you’re filing a joint return, the thresholds are $600,000 at any time during the year or $400,000 on the last day of the year.

If you’re confused about your FBAR and FATCA filing requirements, it’s best to leave your U.S. expat taxes to seasoned pros who will dig into your specific tax situation to find all your filing requirements.

Get started on your U.S. taxes now.

8. Digital nomads may still have to file U.S. state taxes

Yes, it’s possible you still have to file state taxes even if you’re a digital nomad — it depends on the state you lived in prior to moving abroad. If you are unsure if you have a U.S. state tax obligation, we recommend consulting with an expat tax professional to ensure you stay compliant.

9. There are hundreds of IRS forms and schedules — but these are the most used by remote workers abroad

1. Form 1040: The form each American files during tax season to report income to the IRS.
2. FBAR (FinCEN Form 114): Your Foreign Bank Account Report, used to report any assets in foreign financial institutions to the Financial Crimes Enforcement Network of the U.S. Treasury.
3. Foreign Earned Income Exclusion Form 2555: One of two methods digital nomads can use to avoid being double taxed on income earned abroad.
4. Foreign Tax Credit Form 1116: One of two methods digital nomads can use to avoid being double taxed on income earned abroad.
5. FATCA Form 8938: The form U.S. citizens file to report certain foreign financial assets to the IRS.
6. Form 5471: Informational return for U.S. citizens who are also shareholders, officers, or directors of a foreign corporation.
7. Form 8621: Informational return for U.S. citizens who are also shareholders of a passive foreign investment company, including owners of foreign mutual funds.
8. Form 3520: Informational return digital nomads use to report certain transactions with foreign trusts, ownerships of foreign trusts (including certain private pensions), or large gifts from certain foreign persons.

Ready to file or confused about expat tax forms? Get started online with H&R Block — the experts on U.S. taxes for digital nomads.

10. Digital nomads may still have to file taxes in foreign countries

Your tax residence country is where you are legally considered a resident for tax purposes. If you spent a significant amount of time or made over a certain amount of money in another country, you may have to pay taxes in that country.

It’s not one-size-fits-all, either. For example, American digital nomads in Canada and the U.K. will have different tax obligations than digital nomads in Mexico or Thailand. Before you land to do business in a foreign country, get to know their income taxation laws and residency laws because that will dictate your tax obligation.

How to file taxes as a digital nomad living overseas

With H&R Block, you can file your U.S. taxes conveniently online from wherever you currently call home. Digital nomads have two options: File using our DIY online expat tax service (designed specifically for expats), or let one of our Expat Tax Advisors handle it. Here’s how to file your U.S. expat taxes online:

1. Head on over to our Ways to File page.
2. Pick your journey — with you in control using our online DIY tool or letting a Tax Advisor guide you through the process.
3. Review your return and pay once you’re through your chosen journey.
4. We file your return with the IRS.
5. You sit back and relax knowing your taxes were done correctly.

Need help filing digital nomad taxes?

Filing taxes in one country is enough to give anyone a headache, and it only gets more complicated for digital nomads. But no matter where you call home, we bring U.S. tax solutions to you — whether you want to be in the driver’s seat with our DIY online expat tax service designed for U.S. citizens abroad or let one of our experienced Tax Advisors take the wheel. Head on over to our Ways to File page to choose your journey and get started online.

The post Digital Nomad Taxes: 10 Things Americans Abroad Should Know appeared first on H&R Block®.

But before you jump to claim the FEIE, there are a few things you should know:

• If used properly, the FEIE can save you thousands of dollars on your United States taxes
• It’s not a blanket foreign income exclusion — there are stipulations on what you can exclude and what you can’t
• You don’t automatically get the FEIE — you need to meet specific qualifications and then file the proper paperwork (Form 2555)
• The FEIE isn’t your only tax relief option — you should ask your Tax Advisor what options are available to you based on your specific situation.

U.S. taxes for expats aren’t easy. Let our experienced Expat Tax Advisors help prepare your tax return this year to ensure the foreign earned income tax exclusion is elected when it is most beneficial to you. Ready to claim the FEIE? We’ve got a tax solution for you — whether you want to DIY your expat taxes or leave it to one of our experienced Tax Advisors. Head on over to our Ways to File page to choose your journey and get started.

What foreign income can you exclude with the FEIE?

The Foreign Earned Income Exclusion can help reduce or eliminate U.S. taxes on foreign income earned while working abroad, but it doesn’t apply to all sources of income.

This exclusion is only available for earned income and doesn’t apply to passive or investment income such as interest and dividends. Foreign earned income includes:

• Salary
• Wages
• Bonuses
• Commissions
• Self-employment income

All income must have been earned in a foreign country to count as foreign earned income.

Note: You might qualify for the foreign earned income exclusion even if the country in which you’re working doesn’t assess income tax on compensation, like the UAE.

Who qualifies for the Foreign Earned Income Exclusion?

The foreign income tax exclusion applies to those who have lived abroad for a certain period of time within the tax year. However, partial-year exclusions are available if you’ve recently moved to a foreign country or returned to the U.S. mid-year.

The FEIE is available to expats who either:

• Work outside the U.S. as employees, whether for a U.S. or non-U.S. employer
• Work outside the U.S in a self-employed or partner capacity
• Pass either the Bona Fide Residence Test or the Physical Presence Test

Employees of the U.S. government can’t claim the foreign income exclusion. However, an employee of a private company under contract with the U.S. government might still be eligible.

Passing the Bona Fide Residence Test

To qualify as a Bona Fide Resident and pass the test, you must prove that you have more ties to a foreign country than the U.S. You also must be a resident of that country for an uninterrupted period that includes an entire tax year. When and if you go back to the U.S., you must have the intention of returning to your current foreign country of residence. In addition, you must:

• Be a U.S. citizen or be a resident alien of a foreign country with which the U.S. has an income tax treaty.
• Earn active income. Unearned, or inactive, income like pension payouts, interest, and dividends cannot be included.
• Be overseas for work for a period longer than a year.
• Have a permanent place of work in a foreign country.

It is possible to be a Bona Fide Resident for part of the year if you spent at least a full tax year outside the U.S. in a prior year. As a result, you can claim the FEIE for part of the year.

Passing the Physical Presence Test

To qualify under the Physical Presence Test, you must have been living outside the U.S. for 330 full days out of the year. Be careful when you track your time, because a “full day” counts as 24 hours starting at midnight, and you need to be in-country for every minute of those 24 hours.

For example, if you lived in Windsor, Canada and popped over the border to Detroit for Friday night and came back Saturday evening, you wouldn’t be able to count that time towards your 330 full days.

How much foreign income can I exclude?

If you’re an expat and you qualify for a Foreign Earned Income Exclusion from your U.S. taxes, you can exclude up to $112,000 or even more if you incurred housing costs in 2022. (Exclusion is adjusted annually for inflation). For your 2023 tax filing, the maximum exclusion is $120,000 of foreign earned income. If you’re married and both of you meet either the bona fide residency test or the physical presence test, you can each claim the FEIE.

Foreign Tax Credit vs. Foreign Earned Income Exclusion

It’s important to choose between the foreign income exclusion vs. foreign tax credit wisely. If you claim the exclusion and then change back to the foreign tax credit, you can’t claim the exclusion again for five years. The only way to claim the exclusion again involves a costly process with the Internal Revenue Service (IRS). Get tax help from an expat tax advisor to help you understand your options.

Claiming the foreign tax credit and filing Form 1116 might be the better option if any of these apply:

• You’re paying foreign tax at a higher rate than your U.S. tax rate
• You wish to participate in an individual retirement arrangement (IRA)
• You qualify for certain family-related credits based on non-excluded income
• You wish to exclude or reduce taxes on passive or investment income

Foreign Earned Income Exclusion extensions

Even if you haven’t been out of the country long enough to claim the exclusion by your expat filing deadline, you can request an extension to file until you’ve met these time requirements.

You generally must claim the exclusion either:

• Within one year of the due date of your tax return
• By amending a timely filed return

However, you may claim the exclusion if:

• The IRS hasn’t discovered your failure to file your return claiming the exclusion, or
• You owe no tax after taking the exclusion into account

If you haven’t filed returns in prior years, you still might be able to exclude your foreign earned income from U.S. tax. This could have the effect of eliminating your tax liability and any penalties and interest that would be assessed.

Foreign Housing Exclusion and Foreign Housing Deduction

If you’re an expat and you incur foreign housing expenses, you might be able to exclude or deduct them. The Foreign Housing Exclusion is available for expats working as employees with housing expenses like rent and utilities.

The foreign housing deduction is available for self-employed expats paying foreign housing expenses. The amount of your housing exclusion or deduction is based on the difference between the following:

• Your actual foreign housing expenses
• A base amount for your foreign country of residence

You can use the Foreign Housing Exclusion if your housing costs total more than 16% of that year’s FEIE.

To calculate the maximum amount you can exclude, you’d multiply that year’s maximum income exclusion by 0.3 to get 30% of the full exclusion amount. So, for 2023, you’d take $120,000 x 0.3 = $36,000. Something to know is that most large metro areas have higher limits, so it’s important to have a Tax Advisor who knows the ins and outs of taxes in your specific area.

Common problems U.S. expats have with the foreign income exclusion and Form 2555

U.S. expats have a lot of the same questions and issues when they file their FEIE, but these are the most common problems associated with the FEIE:

• You didn’t file Form 2555 – Many expats assume that if they qualify for the FEIE it will be automatically added to their tax filing. To claim the FEIE you must file Form 2555.
• You’re a government employee — Unfortunately, U.S. government employees cannot claim this foreign income exclusion.
• You failed to calculate the FEIE correctly – If you calculate your FEIE incorrectly you won’t get the correct amount excluded.
• You claimed the FEIE when you should have claimed the FTC – For example, if you’re retired abroad and you only have investment and passive income, you may have been better off claiming the FTC.
• You didn’t track your time properly – You must be vigilant about tracking your time if you want to pass the Bona Fide Residency or Physical Presence tests. Even being off by a few hours can mess up your qualifications.
• You had no active income for that year – If you’re living abroad off investment or passive income, you don’t qualify for the FEIE.
• You didn’t pay your U.S. self-employment taxes – You still have to pay self-employment taxes when you’re claiming the FEIE.

These are only a few of the most common issues and problems we come across. If you’re having difficulties or are a new American expat, it’s smart to leave your expat taxes to a specialist.

File your Foreign Earned Income Exclusion with H&R Block

Filing taxes while living and working abroad can be overwhelming and stressful. As an expat, your tax situation is very different and requires specialized expertise. Get started with H&R Block’s Expat Tax Services today.

The post What U.S. Expats Need to Know About The Foreign Earned Income Exclusion (FEIE) appeared first on H&R Block®.

Keep reading to find out more about the U.S./U.K. tax treaty below. Not sure about filing requirements for your U.S. expat taxes in the U.K.? We’re here to help. Get started now.

Why the U.S./U.K. income tax treaty exists

Most countries around the world have some form of income tax that residents are obligated to pay. This can create a problem because American expats pay U.S. income taxes in addition to what they may pay abroad.

Why? Because the U.S. is one of the few countries in the world that taxes based on citizenship, not place of residency. This policy led to some expats paying taxes twice — once in the U.S. and once in their country of residence.

While certain tools like the Foreign Earned Income Exclusion and the Foreign Tax Credit helped alleviate this, there were still some sticky situations — U.S. citizens living in the United Kingdom, for example, ran into trouble when it came to pension taxation. To solve those situations, the U.S. entered into individual tax treaties. The main purpose of these tax treaties is to solve the double-taxation issue, and the United States’ treaty with the United Kingdom is no different.

The U.S./U.K. tax treaty—formally known as the “Convention between the Government of the United States of America and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains”—also addresses tax evasion, income taxes, and capital gains taxes between the two countries.

What else should you know about the United States – United Kingdom tax treaty?

Now that you know the basics of the United States – United Kingdom tax treaty, we can get a bit more into specifics that affect U.S. expats. Within the tax treaty are specific provisions addressing individual tax concerns. While there are more than a dozen provisions, the ones that can affect Americans in the U.K. the most are the Saving Clause and Article 17 – U.S. taxation on U.K. pensions.

Saving Clause

Many U.S. tax treaties have what’s known as a Saving Clause. The Saving Clause essentially states that a country may tax its citizens as if the treaty never existed. As a result, it renders most provisions of the treaty ineffective for Americans living in the U.K., but leaves them open for U.K. citizens living in the U.S.

This is one reason you should get familiar with the Foreign Tax Credit (FTC) — so that if you need to, you can claim it against British taxes paid. The FTC is generally possible because of the exceptions to the Saving Clause. For most treaties, the paragraph immediately following the Saving Clause details the exceptions to the clause.

Article 17 — U.S. taxation on U.K. pensions

So, how do U.K. pensions work for U.S. expats? One treaty benefit is that, contributions to a pension in the U.K. can be tax-deferred, just like your U.S. 401k and other tax-deferred retirement vehicles.

Even though distributions are generally taxable, the double taxation article will help prevent you from paying taxes twice. Another perk of the tax treaty is that it allows your social security (U.K. state pension) to only be taxable in the country they are residing in.

How to claim U.S./U.K. tax treaty benefits

There are some situations you might run into where—despite all the exclusions and other treaty benefits—you may be double-taxed on income. For example, let’s say you’re employed by a British company and live and work in England. Your employer sends you to the U.S. for a business trip, and because income received for services performed in the U.S. is considered U.S. income, you’d owe U.S. taxes on the income you earned while stateside. Article 24 of the U.S./U.K. tax treaty, for example, would help alleviate this particular situation. To claim it, you’d file Form 8833 with your tax return and include your situation in the summary.

Before you run out and file this form, talk to a Tax Advisor. The majority of U.S./U.K. tax benefits you get from treaties don’t have to be claimed with Form 8833. You’d only have to file if provisions in the current tax treaty trump or change a provision of the Internal Revenue Code (IRC) in order to reduce taxes owed.

Need help claiming U.K. tax treaty benefits? Ready to file your U.S. taxes? Get help from the experts at H&R Block

Whether you’re an American who has recently relocated to London or are a full-on U.S./U.K. dual citizen, we’ve got the tax solutions for you. Your Tax Advisor will comb through your financial documents to find you the best solutions for your specific situation, so you can have the peace of mind your U.S. taxes are done right. Get started on your expat taxes today!

The post Understanding the U.S./U.K. Tax Treaty appeared first on H&R Block®.

Keep reading to find out more about the U.S./Canada tax treaty below, including why it exists, what all it covers, and how to make sure you’re getting the benefits you’re entitled to. Not sure about tax filing requirements for your U.S. expat taxes in Canada? We’re here to help. Get started on your expat taxes now.

Why the tax treaty between the U.S. and Canada exists

The U.S./Canada tax treaty, in summary, alleviates tax issues for U.S. citizens and residents living in Canada and Canadians living in the U.S.

Most countries around the globe, including Canada, have some form of income tax that residents are obligated to pay. This can create problems for U.S. expats because Americans file U.S. income taxes even if they aren’t living in the U.S. at the time.

The reason for this is that the U.S. is one of the few countries in the world that imposes taxes based on citizenship, not place of residence. In Canada, your Canadian tax obligation is based on residency status which is determined by the Canada Revenue Agency (CRA). The U.S. policy leaves some Americans responsible for taxes in two countries — once in the U.S. and once in their country of residence. One of the purposes of tax treaties is to solve this double taxation issue, and the United States treaty with Canada is no different.

The U.S. does have certain tools like the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC) that help alleviate the double taxation issue, but there were still some sticky situations — U.S. citizens with Canadian pensions and tax–free retirement accounts, for example, ran into trouble when it came to U.S. taxation of those accounts. The U.S./Canada tax treaty addresses those concerns and directs how those situations and individuals should be taxed.

Among other things, it also addresses cross-country expat financial reporting, to ensure transparency between Canadian financial institutions and the U.S.— so if you’re behind on U.S./Canada financial reporting like your FBAR and FATCA filing requirements, you should get caught up with Streamlined Filing as soon as you can.

Get started on Streamlined Expat Tax Filing now.

Saving Clause

Most U.S. tax treaties have what’s known as a saving clause. The saving clause essentially states that a country may tax its citizens as if the treaty never existed. As a result, it renders most provisions of the treaty ineffective for Americans living in Canada, but leaves them open for Canadian citizens living in the U.S.

This is one reason you should get familiar with the FTC — so that if you need to, you can claim it against Canadian taxes paid. The FTC can be claimed in some instances only because of the exceptions to the saving clause.

U.S. taxation on Canadian retirement plans

One question we hear on a regular basis from American citizens living in Canada is, “How are Canadian retirement plans taxed in the U.S.?”

If you’re a U.S. citizen and you receive benefits from a Canadian Pension Plan and the Old Age Security Plan, the Internal Revenue Service (IRS) will treat those benefits the same as U.S. social security payments for tax purposes.

Get started on your expat taxes now.

How to claim U.S./Canada income tax treaty benefits

The vast majority of tax benefits you get from the U.S./Canada tax treaty don’t have to be claimed. If you found yourself in one of those rare, complicated situations that a specific article alleviates, you’d file Form 8833 with your tax return and include your situation in the summary. Before you run out and file Form 8833, talk to an Expat Tax Advisor.

Get help with claiming Canada/U.S. tax treaty benefits or filing U.S. taxes from Canada

Whether you’re an American who has recently relocated to Vancouver or are a full–on U.S./Canada dual citizen who’s lived in Toronto for decades, we’ve got the tax solutions for you. Whether you file expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help. Get started on your expat taxes now.

The post The U.S./Canada Tax Treaty Explained appeared first on H&R Block®.

What Americans living in Canada should know about U.S. taxes

For starters, Americans and U.S. green card holders living in Canada should continue to file a U.S. tax return each year. As a U.S. citizen, you have a tax obligation to the U.S. regardless where you hang your hat. That means you’re taxed on all your income, including income from your wages, dividends and interest, and rental properties.

Working as a U.S. citizen in Canada can affect your taxes even if you don’t stay long. For example, if you earn income while on a short-term assignment, you’ll need to report that income on your U.S. taxes. As you establish deeper financial roots in Canada, you’ll have more considerations for your American tax filing.

You may need to report your Canadian financial accounts and assets. Generally, U.S. taxpayers with more than $10,000 in foreign bank or financial accounts are subject to FBAR filing and reporting requirements. You may also be subject to FATCA reporting requirements if you have foreign assets valued at $200,000 and higher.

U.S. tax penalties are steep, and can result in fines, a revoked passport, or even jail time. If you’re tempted to skip filing your U.S. taxes or additional financial reporting, you’ll pay the price later. Canada is one country that complies with FATCA reporting—meaning Canada and the U.S. can exchange information about an individual’s financial accounts. Considering the hefty fines and penalties that come from not reporting your assets (upwards of $10,000 in fines per year), it’s worth it to have a U.S./Canada tax expert go through your documents to make sure you’re reporting the correct amount.

You can lower your U.S. bill and avoid dual taxation with certain tax strategies. If you were worried about double taxation between the U.S. and Canada, you can relax. U.S. citizens working in Canada may take advantage of one of two options, detailed below, to lower their taxes:

• The Foreign Earned Income Exclusion and Housing Exclusion – The FEIE and housing exclusion allow American expatriates living in Canada to exclude up to a certain amount of foreign earned income if they meet certain requirements.
• Foreign Tax Credit – The Foreign Tax Credit allows Americans to claim a dollar-for-dollar credit on Canadian taxes paid if they meet certain requirements.

I’m a U.S. citizen retiring in Canada. What do I need to know about U.S. taxes?

If retiring up north is your long-term goal, you should first understand how taxes work when retiring abroad. To start, you still may have to file a U.S. tax return even if you retire in Canada. You’ll also still have to report money in any foreign financial accounts on your FBAR if you meet the requirements

Canadian tax-free investments are not tax-free in the United States. If you own a Canadian Tax-Free Savings Account (TFSA), Registered Education Savings Plan (RESP), or Registered Disability Savings Plan (RDSP), your contributions can grow tax-free as far as your Canadian taxes are concerned. However, your earnings are subject to U.S. taxes, and you may need to report your account as a foreign grantor trust.

Your Canadian pension and retirement account earnings can be eligible for special treatment. Thanks to the U.S. – Canada tax treaty, any benefits paid from the Canada Pension Plans (CPP), Quebec Pension Plan (QPP) and Old Age Security (OAS) pension programs may not be subject to income tax.

Additionally, the U.S./Canada tax treaty allows you to defer U.S. tax on undistributed earnings from a Canadian Registered Retirement Savings Plan (RRSP) or Canadian Registered Retirement Income Fund (RRIF) in certain situations. However, while contributions to such accounts are also tax deferred, the RRSP and RRIF are still subject to FBAR and FATCA reporting.

You might need to report your Canadian retirement and pension on Form 1040. Your H&R Block tax advisor can help you determine if your earnings can be deferred and the appropriate reporting for your U.S. and Canadian taxes. Plus, if you choose to do both your Canadian and American taxes with Block, you’ll only need to provide your information once.

Taxes for U.S.-Canada commuters

Since Canada is America’s upstairs neighbor, there are situations in which you might find yourself popping over the border for work.

For example, let’s say you live in Detroit and work for a Canadian company in Windsor, or the opposite. You would still have to file a U.S. tax return, and you may also have to file a Canadian tax return. Because each situation is different, we recommend you file with an advisor and let them help determine whether you have to file both Canadian and U.S. taxes as a commuter.

Basics of Canada taxes for U.S. citizens

Do expats pay taxes in Canada? Will you pay taxes to the Internal Revenue Service (IRS) or the Canada Revenue Agency (CRA) or both after moving to Canada? As a U.S. citizen working and living in Canada, you may also have to file Canadian taxes:

• Canadian tax residents are taxed on all income, regardless of where it’s earned.
• Nonresidents are taxed on income from employment, business in Canada, investments in Canada and/or capital gains from the sale of a Canadian property.

Who qualifies as a Canada resident? We recommend you speak with a residency expert, but generally, you’re considered a Canadian resident if you maintain residential, social, and economic ties in Canada or if you stay in Canada more than 183 days.

Canada’s federal income tax rates range from 15% to 33%. Similar to taxes in the U.S., the percentage of tax that you pay increases as your income increases into different brackets. Depending on their tax bracket, some Americans would pay higher income tax rates locally than in the U.S.

It’s generally more favorable for Americans living in Canada to use the foreign tax credit vs. the FEIE—but there are exceptions. Your tax advisor can help you make the right decision.

2023-2024 Tax Rates

Provincial/Territorial tax rates top out from 11.5% to 25.75% Ontario has surtax of 20% and 56%

The tax filing season is similar to the U.S. tax year, but with a few differences. Canadian taxes follow a January to December tax year. Tax returns are due on April 30 for individuals and June 15 for self-employed taxpayers. In general, no extensions are allowed.

How to file U.S. taxes from Canada

It’s simple to file U.S. taxes from Canada with H&R Block’s Expat Tax Services. Here’s how to file your U.S. expat taxes online:

1. Head on over to our Ways to File page
2. Pick your journey—in the driver’s seat with our online DIY tool or letting a Tax Advisor take the wheel.
3. Once you’re through your chosen journey, you review your return and pay
4. We file your return with the IRS
5. You sit back knowing your taxes were done right

How H&R Block can help Americans living in Canada with taxes

Thousands of U.S. expats living in Canada have chosen H&R Block to handle their U.S. expat taxes for the peace of mind their taxes are done right. Not only can you trust our expertise and guidance to find your credits and tax-saving opportunities, you can get it all done from the comfort of wherever you call home. Get started on your U.S. taxes today!

The post U.S. Tax Guide for American Expats in Canada appeared first on H&R Block®.

U.S. state taxation for expats can be confusing for even the most seasoned expats, and the penalties for non-compliance are steep. Below, we’ll walk you through the basics of United States taxes and state residency for expats below and help you get started on your own state tax return.

Ready to file for this tax year? You’ve got two options: Jump in the driver’s seat with our DIY online expat tax service designed specifically for U.S. citizens living abroad or let one of our experienced Tax Advisors take the wheel.

Yes, U.S. citizens may still have to pay federal AND state taxes even if they live abroad.

The fact is, if you are a U.S. citizen or Green Card holder who makes above the general United States filing threshold you are still required to file federal U.S. taxes and report your worldwide income every year regardless where in the world you live. It’s much the same for state taxes, depending on the state.

Expat tax rules say taxable foreign income for U.S. citizens living abroad includes:

• Wages
• Interest
• Dividends
• Rental Income

Before you stress about paying taxes twice on the same taxable income (once to the U.S. and once to your new country) you should know there are tools and benefits available to expats. These benefits and tax credits, such as the Foreign Earned Income Exclusion and Foreign Tax Credit, can help you avoid double taxation.

Want a quick summary of taxes for expats? We distilled what you should know into 20 things you should know about taxes for expats.

Who must pay state taxes as an expat?

“Do I have to pay state taxes while living abroad?”

Great question.

Whether or not you need to file state taxes while living abroad depends on the state you last lived (or were considered a resident of), if you’re still considered a resident of that state, and if you make income in that state.

State residency while living abroad

State residency while living abroad is a tricky topic. Each state has different definitions of who qualifies as a resident and some states (like Florida) don’t even have state income tax requirements. On the other end of the spectrum are states (like New York and California) that require you pay expat state taxes on foreign income.

Some factors that can affect whether you’re considered a state resident for tax purposes include:

• Where your car is registered
• If you have a driver’s license or state ID
• Where you are registered to vote
• If you own any property or have mortgage/lease payments on any property in the state
• If you pay any utility bills in the state
• Where your family lives
• The permanence of your overseas assignment
• Your financial assets and accounts within the state

Even if you don’t qualify as a resident, some states require expats pay taxes if they have any income from that state. Not sure what applies in your situation? Instead of diving into each state’s specifics here, below you’ll find links to each state’s revenue department (and state residency qualifications), so you can jump right to your state in question.

If you’re still unsure about your residency or your state’s qualifications, it’s best to leave your tax filings to an expert.

What’s the best state for expat taxes?

This question is right up there with “what’s the best place to live abroad?” The answer is the same — it depends. The best state residency for expats depends on your life situation, your needs, and what’s most important to you.

States with no income tax for expats

Some states have no income tax. Those states are:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

States that only tax U.S. expats on interest and dividends

• Tennessee
• New Hampshire

States with other considerations

While all states have rules on residency status and who qualifies, some states have more specific considerations:

• California
• New Mexico
• South Carolina
• Virginia
• New York

Some expats refer to these states as “sticky” states because of the specific considerations. If you’re an expat and also considered a resident of one of these states we highly recommend getting started with an Expat Tax Advisor.

Do expats need to pay state taxes for past years?

If you’re reading this article and just realized you should have been filing and paying U.S. federal and state taxes for expats, don’t panic — we’ve helped thousands of U.S. citizens in this situation. There are special rules, called Streamlined Foreign Offshore Procedures, that let expats catch up on back taxes.

To qualify, you must:

• Have lived in a foreign country without a U.S. abode for at least 330 days during one of the last three years
• Confirm it was an honest mistake that you failed to file U.S. tax returns and FBAR Get started with streamlined filing now.

How to file state expat taxes online with H&R Block Expat Tax Services

Ready to file state taxes as an expat? Here’s how to file your U.S. expat taxes online:

1. Head on over to our Ways to File page
2. Pick your journey — in the driver’s seat with our online DIY tool or letting a Tax Advisor take the wheel.
3. Once you’re through your chosen journey, you review your return and pay
4. We file your return with the IRS
5. You sit back knowing your taxes were done right

Now that you know expats may need to pay state taxes while living abroad, it’s also important to understand that they can be more complicated than filing from within the States. Whichever method you choose to file, you can rest assured that your expat state taxes will be filed accurately, backed by H&R Block’s 100% Accuracy Guarantee.

Get started on your expat taxes now!

The post Do Expats Pay State Taxes? State Tax Guide for Americans Living Abroad appeared first on H&R Block®.

So, if you’re a citizen of another country and you live and work in the United States, you may qualify as a resident alien.

Who is considered a resident alien?

As explained above, you are a resident alien if you are a permanent resident of the United States but do not have citizenship. According to the United States Citizenship and Immigration Services there are three types of resident aliens: 

1. Permanent resident: You have been given the legal and lawful right to live in the U.S. 

2. Conditional resident: If you have applied for residency, usually based on marriage or you’re working under the golden visa process, you will receive a two-year green card.  

3. Returning resident: You are a returning resident if you have been outside the U.S. and are returning. You must apply for re-admission if you’ve been outside the U.S. for more than 180 days. 

There are two different ways to qualify as a resident alien in the U.S.:

1. You pass the Green Card test
2. You pass the substantial presence test

The green card test

For the green card test, you’re considered a resident alien if you are legally living permanently in the United States as an immigrant. You have this status if you have an alien registration card, (known by you and I as a green card). You need to either currently have a green card or have had one in the previous calendar year.

Resident aliens and the substantial presence test

The substantial presence test is pretty much what it sounds like: a test to determine if you’ve spent enough time in the United States to be considered a resident alien. You pass the test if you were physically present in the U.S. at least 183 days over three years, which would include a minimum of 31 days during the current year. This includes:

• All the days you were present in the current year
• 1/3 of the days you were present in the first year before the current year
• 1/6 of the days you were present in the second year before the current year

Resident alien vs nonresident alien: What’s the difference?

If you don’t qualify as a resident alien, you might be considered a nonresident alien. The definition of a nonresident alien is someone who’s legally in the U.S. for a short time or who doesn’t have a green card. The main difference between the two is the paperwork and what income is taxed.

For tax purposes, there are some important differences between resident and nonresident aliens. Your tax obligation as a resident alien in the U.S. is that you report and owe taxes on your entire income (regardless where it was earned). This income is reported using IRS Form 1040. On the other hand, the non-resident alien tax rate only applies to taxes on the income from U.S. sources. You can report domestic income on IRS Form 1040NR or 1040NR-EZ.

Another difference is that, when it comes to tax filing, resident aliens can take advantage of foreign tax credits, while nonresident aliens cannot.

In some cases, you can still be considered a nonresident alien even if you meet the substantial presence test. To qualify, you must:

• Hold certain visas
• Have a closer connection to a foreign country than to the United States.

Dual status aliens

In some cases, you can be considered both a resident and a nonresident alien, known as a dual status alien. These cases usually happen the year you arrive or depart from the U.S.

Resident alien tax implications in the U.S.

A common question our tax advisors get is “what taxes do resident aliens have to pay?” Good question!

All resident aliens need to pay U.S. taxes. Just like a U.S. citizen, you need to report all income, regardless if you earned it in the U.S. or abroad. This includes:

• Interest
• Dividends
• Wages or any other compensation for your services/products
• Income from rental properties
• Royalties
• Other income you receive

If you’re an alien and you leave the U.S., you must get a certificate of compliance that proves you’ve paid your U.S. taxes. If you don’t, you must file and pay at your point of departure. Before you leave, be sure to download or take a look at Form 1040-C or Form 2063 from the Internal Revenue Service to find out what you need to report.

Need tax help as a resident alien? Trust the experts at H&R Block

Have any more questions about resident alien status? We are here to help. Get started with virtual Expat Tax Preparation from H&R Block today.

The post What is a Resident Alien? appeared first on H&R Block®.

If these questions sound familiar, you’re not alone — U.S. expat tax rules can be confusing and complicated for even the most financially-savvy Americans.

Despite what you might think, you do have a tax obligation to the United States as long as you’re a citizen — regardless if you’re currently living in Tokyo, Japan or St. Louis, Missouri.

Ready to file your expat taxes? Whether you file expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help.

Do U.S. citizens pay taxes if they live abroad?

Yes, U.S. citizens have to pay taxes on foreign income if they meet the filing thresholds, which are generally equivalent to the standard deduction for your filing status. You may wonder why U.S. citizens pay taxes on income earned abroad. U.S. taxes are based on citizenship, not country of residence. That means it doesn’t matter where you call home, if you’re considered a U.S. citizen, you have a tax obligation this tax year.

Your expat tax filing requirement doesn’t change even if you’re paid by a foreign employer overseas. In addition to federal income taxes, some U.S. citizens living abroad also need to file state taxes as well, depending on their last state of residence.

Taxable foreign-earned income includes:

• Wages
• Interest
• Dividends
• Rental Income
• Qualified retirement account distributions

Additionally, if you have foreign financial accounts (including bank accounts, investments, and other financial accounts) or assets, you may need to report them. The U.S. requires citizens to disclose international financial accounts that held $10,000 or more at any one time in the year. To do that, you have to file a Foreign Bank Account Report (FBAR). If you have foreign assets with a value greater than $200,000, you may also have to file FATCA Form 8938.

If you’re a U.S. citizen abroad and have never filed a tax return, you can relax. The IRS built in a safeguard for honest expats who truly didn’t know they had tax filing obligation. You can get caught up penalty-free with Streamlined Filing Compliance Procedures. To qualify, you must:

• Have lived in a foreign country for at least 330 days during one of the last three years
• Confirm it was a genuine mistake you failed to file your U.S. tax return and FBAR

How much in taxes do I pay if I work overseas?

Now that you know U.S. citizens have to pay taxes on foreign income, your next question is probably about how much in taxes you pay if you work overseas. You might wonder if you’ll have any money in the bank after paying both your U.S. and host country income tax liabilities!

Fortunately, even though most U.S. citizens working overseas must file taxes, expat tax rules have evolved so most expats don’t actually owe any amount at the end of the year.

Is there a tax exemption for U.S. citizens living abroad?

A common question we hear is, “Do Americans living abroad get taxed twice?”

The short answer is no, Americans do not have to pay taxes twice. While there is no overall U.S. expat tax exemption, there are exclusions and credits to help alleviate the tax burden for U.S. citizens living abroad. These include:

• The Foreign Earned Income Exclusion (FEIE) and Housing Exclusion – The FEIE and foreign housing exclusion allow U.S. expats to exclude up to a certain amount of foreign earned income if they meet certain requirements.
• Foreign Tax Credit – The Foreign Tax Credit allows Americans to claim a dollar-for-dollar credit on foreign taxes paid if they meet certain requirements. Because you may pay a higher income tax in France than you would in the U.S., this may be a better option to choose than claiming the FEIE.
• Tax treaties – To prevent double taxation, the U.S. has tax treaties with individual countries, which dictate how special circumstances are handled (including foreign retirement accounts).

Tax exclusions and credits are just two examples of the many unique tax rules applicable to U.S. expats working overseas, so it could be helpful to work with a qualified and reputable expat Tax Advisor to help manage your worldwide tax burden.

Want to know more? Learn the top 20 things every American overseas should know about U.S. expat taxes.

What are some common tax forms U.S. expats need to know about?

Now that you know you have to file, you should get to know some of the common forms U.S. expats use to file their taxes.

1. Form 1040 – The form every American files during tax season to report income to the IRS. A common question you may have is “Does a US citizen living abroad file IRS Form 1040 or 1040NR?” The answer is, it depends. If you are a nonresident alien, you will file the 1040 NR.
2. Foreign Tax Credit Form 1116 – This is the form you use to claim the foreign tax credit.
3. FBAR (FinCEN Form 114) – If you had more than $10,000 in foreign accounts at any time in the year, you’ll have to report it to FinCEN as well as the Internal Revenue Service. This is the form you use to report foreign accounts to FinCEN.
4. Foreign Earned Income Exclusion Form 2555 – The is the form you use to claim the foreign earned income exclusion.
5. FATCA Form 8938 – How you report assets in foreign financial institutions to the IRS.
6. Form 5471 – Informational return for U.S. citizens who are also shareholders, officers, or directors of a foreign corporation.
7. Form 8621 – Informational return for U.S. citizens who are also shareholders of a passive foreign investment company or foreign mutual fund.
8. Form 3520 – You’ll use this IRS form to report certain transactions with foreign trusts, ownerships of foreign trusts, or if you receive certain large gifts from certain foreign persons.

I’m retiring abroad. What do I need to know?

If retiring abroad in the countryside is your long-term goal, you should first understand how taxes work when retiring abroad:

• Even if you retire abroad you still may have to file a U.S. tax return
• You’ll still have to report money in any foreign financial accounts on your FBAR if you meet the requirements
• If you have a foreign pension or retirement account it may be treated differently than in the U.S.

How to file U.S. taxes as an expat

With H&R Block’s tax preparation services, you have two options to file your U.S. expat taxes: With you in the driver’s seat using our DIY online expat tax service (designed specifically for expats), or by letting one of our experienced Expat Tax Advisors take the wheel. No matter which journey you choose, you get the 100% Accuracy Guarantee from H&R Block.

Here’s how to file your U.S. expat taxes from overseas:

• Head on over to our Ways to File page
• Pick your journey—in the driver’s seat with our online DIY tool or letting a Tax Advisor take the wheel.
• Once you’re through your chosen journey, you review your return and pay
• We file your return with the IRS
• You sit back knowing your taxes were done right

Living abroad? Confused about filing your U.S. taxes?

For U.S. citizens abroad, expat tax rules can be a headache. Have more questions or confused on how expats file taxes? Ready to file? Rely on H&R Block’s American expat tax services. No matter where in the world you are, we’ve got a tax solution for you. Get started with our made-for-expats online expat tax services today!

The post American Expat Tax: What U.S. Citizens Living Abroad Should Know appeared first on H&R Block®.

1. In general, yes — Americans must pay U.S. taxes on foreign income. The U.S. is one of only two countries in the world where taxes are based on citizenship, not place of residency. If you’re considered a U.S. citizen or U.S. permanent resident, you pay income tax regardless where the income was earned.
2. While there is no overarching tax exemption for U.S. citizens abroad, the Internal Revenue Service has created a few tools like the foreign earned income exclusion and foreign tax credit that can give you some tax relief by lowering your foreign income tax obligation.

How does it all work? Read on to learn the ins and outs of foreign income taxes. Don’t have time to catch up on all the details? Head on over to our Ways to File page and get started on your expat taxes today. Whether you file expat taxes yourself with our online DIY expat tax service designed specifically for U.S. citizens abroad or file with an advisor, H&R Block is here to help.

What foreign income is taxable in the U.S.?

If you’re a United States citizen (including Green Card holders and dual citizens) and earn income overseas, you should know that most foreign income is taxable in the U.S., including:

• Wages – Wages include any income paid to you for services or goods sold. This includes if you’re employed by a foreign company or if you’re a self-employed contractor working in a foreign country.
• Interest – Interest includes money earned from a foreign bank account or a CD, for example.
• Dividends – Dividends include payouts on foreign-owned stock.
• Rental Income – Let’s say you bought a house in the Bahamas for a steal, and you turn it into a rental property. You need to pay taxes on that rental income.

If you can count any of those sources as a means of income, you likely have a tax liability to the U.S.

How do I report foreign income for my U.S. taxes?

You now know you have a tax liability to the U.S., but how do you report it in your yearly U.S. tax filing? What if you’re a contractor — how do you report foreign income without a W-2?

If you earned foreign income abroad, you report it to the U.S. on IRS Form 1040. In addition, you may also have to file a few other international tax forms relating to foreign earnings, like your FBAR (FinCEN Form 114) and FATCA Form 8938.

If you earned money while working as a freelancer or contractor overseas, you’re considered self-employed and still pay taxes. In addition, you may also have to pay self-employment taxes.

Foreign income tax isn’t cut-and-dry. Because of all the stipulations, schedules, and requirements, it’s always in your best interest to let a trusted foreign income tax expert handle your taxes, like the Tax Advisors at H&R Block Expat Tax Services. Incorrect reporting can lead to large penalties, while having someone who knows the ins and outs of all the forms can help you save money on taxes.

How the Foreign Tax Credit and Foreign Earned Income Exclusion can reduce your foreign income tax obligations

A question we commonly get is, “how much foreign income is tax-free?” No foreign income is tax-free, but there are mechanisms in place to help prevent you from paying too much or paying taxes twice on the same income — the Foreign Earned Income Exclusion (FEIE), and the Foreign Tax Credit (FTC). They both work to reduce your U.S. taxes on foreign income, one by excluding the income earned overseas from your taxes and one by giving you a dollar-for-dollar credit on taxes you’ve already paid to your host country.

If you want to take advantage of the Foreign Income Exclusion or Tax Credit, you need to choose between claiming the FEIE and the FTC wisely. Not doing so can lead to unpleasant surprises in future tax filings.

How do I claim the Foreign Tax Credit?

The Foreign Tax Credit works like this: Say you are working in a country that has a vague tax treaty with the U.S. As a result, you end up paying taxes directly to that country. With the Foreign Tax Credit, you can show the U.S. how much money you paid in taxes to that foreign country and receive a credit for every dollar you owe, so you don’t have to pay taxes for that same income again on your U.S. tax filing.

If you qualify, you claim the Foreign Tax Credit by filing Form 1116.

How do I claim the Foreign Earned Income Exclusion?

The Foreign Earned Income Exclusion is the most common tool expats use to avoid double taxation on income earned overseas. Even so, there’s still some confusion on how it actually works — it’s not automatic, for example. First, you must spend a certain number of days outside the U.S. per year and prove your ties to your new country. You’ll also need to file a U.S. tax return, and you can only claim the exclusion if you file IRS Form 2555 with your return — even if all of your foreign earned income is excludible.

How much is the Foreign Earned Income Exclusion for 2023?

The maximum foreign earned income exclusion amount is updated every year. For the 2024 tax year (2023 calendar year) you could exclude up to $120,000 or even more if you incurred housing costs. Learn more about that Foreign Housing Exclusion and Deduction. (Note that exclusion is adjusted annually for inflation). Married? The exclusion applies to each of you separately, so you each may qualify for the maximum amount unless only one of you works.

Something to note is that the exclusion does not apply to passive income such as interest and dividends.

If I make under the foreign earned income exclusion amount, do I need to file a tax return?

Whether working abroad or in the U.S., you must file a U.S. tax return if you meet the filing threshold which is generally equivalent to the standard deduction for your applicable filing status.

Need help with foreign income tax filing? H&R Block is ready to help, no matter where you are

Still unsure about foreign income taxes? Ready to file your U.S. taxes on foreign income? No matter how complicated your U.S. tax return is, there’s an expat tax expert ready to help. Get started with Virtual Expat Tax Preparation today!

The post Do U.S. Expats Pay Foreign Income Tax if Working Overseas? appeared first on H&R Block®.

Imagine this — you’ve been living outside the U.S. for a few years, building a new life in a far–away home away from home. You finally feel like you’ve got the whole living abroad thing down, and book a trip back to the U.S. to visit family and friends.

Imagine your surprise when you get to customs and find out your passport was revoked by the IRS. Alarming, right? It may sound like a scare tactic, but this scenario is a reality for some U.S. expats — and one we want to help you avoid.

Take care of your passport by taking care of your U.S. expat taxes

As a U.S. expat, you likely know where your passport is at any given time and the requirements needed to keep it up to date. Can you say the same about your tax requirements? You should be able to — the IRS recently said it’s following through on plans to implement tax penalties like revoking passports or denying renewals for those with tax debt of $54,000 or more. As a first step, the IRS sends at–risk taxpayers a letter. But as many expats know, international mail can be slow — or not arrive at all.

Then, while your letter is in the mail, your case is also sent to the Department of State. This is what could potentially prevent your return trip. Instead of traveling back to your home abroad, you’re stuck in the States until your situation is resolved, which could take months or years. Meanwhile, you may have a job, family and other responsibilities counting on you abroad.

If you’re thinking there’s no way you could owe that much, consider this: Many citizens living abroad don’t know they have to pay U.S. taxes on foreign income, meaning their unpaid taxes start stacking up. Pile on yearly penalties of $10,000 or more for failing to file returns or other required forms and $54,000 is not so much of a stretch.

Here’s what it means to you: If you owe the IRS $54,000 or more and you don’t have a payment plan or other agreement set up, your passport could be at risk.

If this makes you nervous, we get it. You should know the IRS does give you options, such as payment agreements, so you can avoid risking your passport. Plus, you’re not alone — our international tax advisors are experts in helping clients to become compliant and avoid tax penalties in these situations.

Get started on your expat taxes now.

Other U.S. tax matters expats should know about

You might be thinking, “I’ve been filing my taxes; I’m good, right?” Well, maybe, but U.S. taxes for citizens living abroad are tricky and you need to be up–to–speed on the additional expat tax rules. It’s truly a case of what you don’t know might hurt you — and cost you dearly.

• Your foreign pension. Saving for an expat retirement is smart, but the type of foreign pension account you have matters. You may need to file specific forms depending on the account type and value. If they’re not reported correctly or not at all, you may owe large penalties — starting at $10,000 — but may be more. You need a knowledgeable tax advisor to help you figure out what to do in your situation.
• Your bank accounts. Don’t owe the IRS? You still might face penalties if you didn’t file the right paperwork (Foreign Bank and Financial Accounts or FBAR) for your foreign bank account. These penalties can be steeper than tax penalties — $10,000 for each violation.
• The IRS is turning up the heat with enforcement. While the IRS began the program to revoke passports a few years ago, it got more aggressive in 2019 with the involvement of the State Department. This tactic along with FATCA and FBAR reporting rules make it harder for expats to hide. What’s more, the amnesty programs for tax debt, interest and penalties have changed and may continue to change. That said, options available now might not be available in the future.

Get started on your expat taxes now.

How H&R Block can help keep your passport safe and keep your taxes and FBAR in compliance

Here’s the good news. H&R Block’s Expat Tax Advisors can help you keep your passport safe, save money on your U.S. tax filing, and avoid double taxation with our Expat Tax Services.

For example, we can help make sure you’re in compliance, help you navigate tax tools like the foreign tax credit and foreign earned income exclusion, and if you haven’t filed while you’ve been abroad, we can help you get caught up with the IRS amnesty program.

Filing taxes for expats is tricky, so having an experienced tax advisor by your side can make all the difference. Luckily, we help expats all over the world do just that. No matter where in the world you are, we’ve got a tax solution for you. Get started with our made–for–expats online expat tax services today!

The post Can back taxes cost you your passport? In some cases – yes. appeared first on H&R Block®.