Chartwell Associates Pte Ltd | US Worldwide Taxation
 

US Worldwide Taxation

US Worldwide Taxation

 


 

 

The United States, along with Eritrea, is the only country that imposes a global income tax on all citizens regardless of their place of residence or length of stay abroad.

 

If you are a US citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated taxes are generally the same whether you are in the United States or abroad. Under worldwide income tax, US and foreign income is subject to US income tax regardless of where you reside.

 

In other parts of the world, the basic rule is that taxes are based on residency rather than taxing global income based on citizenship.

 

 

 

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Filing an IRS Tax Return

 

 

If you are a US citizen, the rules for filing income, estate, and gift tax returns and paying estimated taxes are generally the same whether you are in the United States or abroad. You are taxed on worldwide income from all sources, must report all taxable income, and pay taxes under the Internal Revenue Code.

 

Many Americans living abroad are eligible for special tax benefits, including:   Foreign Earned Income Exclusion and Foreign Tax Credits. However, it can only be obtained by filing a US return. (See Publication 54, Tax Guide for US Citizens and Residents Aliens abroad)

 

 

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US Taxpayers who hold foreign financial accounts are required to report those accounts to the US Treasury even if the accounts do not generate taxable income. Taxpayers must electronically file Foreign Bank and Financial Account (FBAR) reports through the BSA E-Filing System by April 18, 2022. (See Foreign Bank and Financial Accounts Report (FBAR))

 

 


 

When to File

 

 

If you are a US citizen living abroad or serving in the military outside the US, your normal return date will automatically be extended by two months, allowing you to file your return without requesting an extension.

 

 


 

Get Help

 

 

Preparing a US tax return can be very complicated unless you are very experienced, but the additional complexity and additional reporting requirements for US citizens living abroad can lead to mistakes and oversights.

 

The IRS is fair, but will not be unduly responsive to late, inaccurate or false reports. Stay safe and seek professional help, especially if it’s your first time being an American expat.

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