Expat Tax Preparation Made Easy
Dealing with a tax preparer for your expat tax return can feel overwhelming. Knowing what documentation you will need to provide will make it easier for you. You can use this as a guideline for information to save.
The Questionnaire – Your tax professional will ask you to provide the basics: name, address, contact information, ID numbers, marital status, etc. There will also be questions about occupation, ownership of property and businesses. The questions may seem wearisome, but keep in mind; they are necessary to fulfill your filing requirements and can save plenty of time in the long run!
Last year’s return – An important piece of information can be your prior year tax return. This is a starting point for your tax professional. They can see what credits you may have carried over and any income or deduction items you may have overlooked.
Keep a travel calendar – If you travel back and forth between your foreign home and the U.S., it is important to know what dates you left and returned. It is also necessary to know how much of the time away was for business or pleasure. The foreign earned income exclusion and housing exclusion are calculated using this information. Providing this detail to your tax professional is important.
Earned income – If your only earned income is as an employee, this part will be easy. Your employer will provide you with a W-2 or an equivalent from the foreign country. If you are self-employed, the tax professional will need to know if you are paid as an individual or if you have formed a foreign entity. If the latter, is true, a whole new set of questions will come your way! Either way, you will need to provide records of earnings and expenses for the year.
Passive income – You may have interest, dividends, or stock sales. Statements are typically provided by the financial institutions you use for your investments. The 1099-b for stock sales should give the detail of the purchase dates, purchase price, sales date, and sales price. If not, additional information will be needed. Keep in mind, if you have foreign bank accounts, you may have further reporting requirements, check with your tax professional.
Retirement income – If you are in your golden years, you may have 1099-Rs from IRA’s, pensions or other retirement accounts. You also may have Form 1099-SSA from your social security.
Rental income – Many expats have houses in the U.S. that they rent out while they are overseas. The rent collected as well as any expenses paid for the properties must be reported as well.
Other income – You may have other miscellaneous income from partnerships, trusts, gambling income, etc. Any forms you receive reporting income need to be provided to your tax professional.
Deductions – There are many deductions you may be eligible for. Here is a general list:
- U.S. residence – if you had a U.S. residence during the year, you may have mortgage interest and real estate taxes that are deductible.
- Foreign housing expenses – Certain individuals have foreign housing expenses that are excluded from income. You will need to provide: rent expense, utilities, insurance, repairs, etc.
- Other deductions – If you make charitable contributions to charities accepted by the U.S., pay large medical expenses, student loan interest, college tuition, alimony, or misc. business expenses you need to let your tax professional know.
Keep in mind, these are the basics. If you have unusual or other tax issues, it is important to communicate the information with your tax professional. Remember, they are there for you!