It’s Tax Time Again – Expat Style

Here it is, the end of January already.  So very much is going on – fiestas, football play-offs, fun in the sun, taxes.  Whoa!  What’s this about taxes?  So soon?  Can’t a person have some peace and quiet about that topic before April 15th comes around?

Actually, January plays a big part in US income taxes.  During this month employers, financial institutions, and the like are tasked with preparing and providing taxpayers with the information needed to prepare their “timely and accurate” income tax returns.  Forms W-2, 1099-INT, 1099-DIV, 1099-R and others find their way via the “snail mail” to taxpayers everywhere.  It’s quite a process for these providers.  You think preparing your own tax returns is a chore?  Imagine having to identify the proper form to use, compile and insert information on it and sending it off to employees, customers, clients, etc. – hundreds of thousands at a time!

So very often I’ve heard the comment, “I moved to [________] (fill in the blank) to get away from the grasp of the Internal Revenue Service (IRS),” from persons living outside of the USA.  It’s a common misconception.  The long arms of the IRS have you in its grasp no matter where you are.  (If we ever colonize other planets, I can just imagine the problems and heartaches this time of year would bring when it comes time to file!)

With this in mind, it’s time to answer some of those questions that keep popping up.  I apologize if the answers you read don’t make you very happy or spoil your day.  Statutes and regulations are what they are – and there’s really no “legal” choice when it comes to following them.

DO I HAVE TO FILE AN INCOME TAX RETURN?

In short, for the most part, yes.  If you are a “US Person” (a citizen of the USA, a resident alien [green card holder], or a nonresident alien with income from a source in the USA) you are required to file an annual income tax return.  US citizens and green card holders are required to file and pay tax on all of their worldwide income, regardless of source.  Nonresident aliens (no green card) only have to file and pay tax on income received from an US source.

Now, I say “for the most part.”  There are US Persons who are not required to file their annual income tax return.  These persons are those whose income is less than a certain amount, which depends on that person’s filing status – Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er) with Dependent Child.

For 2012 income taxes, these amounts are:

Single (under age 65) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9.750

Single (age 65 and older). . . . . . . . . . . . . . . . . . . . . . . . . . . $11,200

HoH (under age 65) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $12,500

HoH (age 65 and older) . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,950

MFJ (both spouses under age 65) . . . . . . . . . . . . . . . . . . . . $19,500

MFJ (one spouse 65 and older) . . . . . . . . . . . . . . . . . . . . . . $20,650

MFJ (both spouses 65 and older). . . . . . . . . . . . . . . . . . . . . $21,800

MFS (any age). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,800

QW (under age 65). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,700

QW (age 65 or older) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,850

So, for an example, let’s say that you are a single retiree, over the age of 65.  If the total of all of your income (Retirement/Pension, Social Security, Bank Interest, Stock Dividends, etc.) exceeds $11,200, then you are required to file a 2012 US Income Tax Return.

There are a few cases in which a person making less than the required minimum amount of income may want to voluntarily file an income tax return.  Two instances which come to mind:

1. A person who had income taxes withheld – filing the tax return will initiate the refund process.
2. A person who is filing or plans to file an US immigration/visa application – the US government asks for three (3) years worth of returns as proof of sustained income.

WHICH FORM DO I USE?

Depending on the complexity of your situation, a US citizen or green card holder would use (in order of complexity, from simple to complex) Form 1040EZ, Form 1040A, or Form 1040.  A nonresident alien would use Form 1040NR.  These forms are available for download from the IRS’s web site at http://www.irs.gov/Forms-&-Pubs.

WHEN IS THE FILING DEADLINE?

The normal filing deadline for 2012 income taxes is April 15, 2013.  I say, “normal,” because that is the deadline for a US resident.  An advantage of residing outside of the USA is an automatic 2-month extension in time to file, making the deadline June 17, 2013 (usually June 15, but in 2013, that’s a Saturday – the filing deadline is moved to the next business day).  A 6-month extension to file is available to all taxpayers, but requires the individual taxpayer to file a Form 4868 and pay any taxes due.

NOTE:  This is the filing deadline for the tax return.  Income taxes are due on April 15, regardless of what extensions in time to file you may have been given.  Late payers of taxes due will be penalized and charged interest on delinquent taxes and penalty.

THIS IS TOO MUCH!  I NEED HELP!

I just may be able to help you!  I do have my own Tax Preparation and Consulting firm that specializes in helping US Expats, retirees, and their families.  Please feel free to contact me with your income tax questions or problems at [email protected], or leave a comment below.  Your case will be handled privately, personally and professionally.