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Expat Taxes

The Importance Of Form 8992: A Guide For Taxpayers

January 4, 2023

The United States is one of the few countries in the world that taxes its citizens on their worldwide income, regardless of where they live. This can create a significant tax burden for U.S. citizens living and working abroad.

The good news is that there is a way to minimize your tax liability as an expatriate. Form 8992, the Election to Defer Payment of Tax Attributable to Qualified Business Income, allows you to defer paying taxes on up to $1 million of your foreign income. This article will explain everything you need to know about Form 8992, including eligibility requirements and how to file.

What is Form 8992?

Form 8992 is the form taxpayers must file to take advantage of the deferral of tax on up to $1 million of their qualified business income from sources outside the United States. The purpose of Form 8992 is to allow taxpayers to pay taxes on their foreign income over a five-year period, rather than all at once. Qualifying taxpayers can defer their foreign tax liability and also receive a foreign tax credit for the income taxes paid in the foreign country. This can significantly reduce their overall tax bill and save them money.

Who needs to file Form 8992?

Form 8992 is only available to qualifying taxpayers who earn income through a foreign business. To qualify, you must be the owner of a business in the foreign country, be self-employed, or be a partner in a business outside the U.S. You must also have taxable income from sources in the foreign country and must file an income tax return in the foreign country. In addition, you must be a U.S. citizen, resident alien, or nonresident alien with specified income from sources outside the United States. If you qualify for Form 8992, you will be required to complete and submit the form together with your U.S. income tax return.

What are the benefits of filing Form 8992?

Filing Form 8992 can save qualifying taxpayers money by allowing them to spread out the payment of large foreign tax liabilities over several years. It also allows them to claim a foreign tax credit for the taxes paid in the foreign country. The form can also provide a way to manage large foreign taxes more effectively, and it gives taxpayers the ability to defer paying the hefty U.S. taxes they would otherwise owe. This means they can reinvest the deferred foreign income in their global business instead of paying the tax upfront.

What happens if I don’t file Form 8992?

If you fail to file Form 8992, you will be required to pay the full amount of tax due on your foreign income upfront. This can be a significant burden, especially for taxpayers with large amounts of foreign income. In addition, taxpayers who fail to file Form 8992 may be subject to penalties for failure to file, failure to pay, or both. In some cases, interest may also be assessed. It is important that taxpayers who qualify for Form 8992 do not miss the filing deadline or they may be liable for severe tax penalties. Conclusion: By understanding the requirements and benefits of filing Form 8992, taxpayers can make an informed decision about how best to manage their foreign income and taxes. Filing Form 8992 can potentially save taxpayers significant amounts of money, so it is well worth taking the time to learn how to file the form correctly.

If you need help filing your Form 8992, visit our contact page to connect with us.

Filed Under: Blog Tagged With: Expat Tax Filing, Expat Taxes, Expatriate Tax Filing, Expatriate Tax Returns

2021 Tax Returns: File and Avoid These Mistakes

September 29, 2022

 

Don’t miss the deadline! People who have not filed their 2021 tax return have a limited time to complete filing. The extension deadline is October 17, 2022. Learn about the best way to file and how to avoid common mistakes when filing under an extension with Expatriate Tax Returns.

The best way to file tax returns is electronically. Filing electronically is the quickest and easiest way to file since the submission will be immediate, the electronic system can detect form errors, and calculates data. Instead of waiting on the postage system to deliver tax returns or for approval on the filing submission, taxpayers can depend on accuracy and effectiveness by filing online. Filing online helps taxpayers avoid these common mistakes:

Misspellings

Names used for filing should match the spelling on the taxpayer’s Social Security Card and ID. Misspellings could prolong filing time and could disqualify the filing submission.

Inaccurate Information

Information such as the SSN, taxpayer income, address, and other information should be accurate and the exact same as what is printed on the associated documents. Online filing could help prevent submission rejection since the system can prevent mathematical errors.

Missing Information

Provide as much information as possible, especially if the online system is requesting such information. If any data is missing from the submission, preparers will have to collect the information which prolongs the filing process time and can disqualify the submission.

Visit www.expatriatetaxreturns.com if you have any questions or concerns about electronically filing 2021 tax returns under the October 17, 2022 extension deadline.

Filed Under: Blog Tagged With: American Expats, COVID-19, COVID-19 Pandemic, Expat Filing Requirements, Expat Tax Filing, Expat Taxes, Pandemic, penalty relief, Tax penalty

Stay Organized for Tax Season

August 12, 2021

It’s back-to-school season! Use the cooler temperatures and time away from the kids to get organized. We always like to keep taxes top of mind and have perfected a few organizational tips that help us stay on track. Here are a few tips that we find work for our customers and ourselves:

  1. Designate a Space: Keep all of your tax documents in one place. A simple file folder with all of the necessary forms will keep you from running around attempting to locate everything come April.
  2. Label Your Things: Divide your receipts into separate sections, with everything nicely labeled with a system that works for you. Keep childcare expenses separate from medical, or create categories that you find helpful.
  3. Find Some Time: Don’t let tax season sneak up on you! Carve out some time on your calendar of choice. If it’s an hour per month or 5 minutes a day to stay organized, make sure you keep yourself ahead of the game.

Filed Under: Blog Tagged With: expat tax information, Expat Taxes, Expatriate Tax Returns, filing your expat taxes, tax season

U.S. Expat Tax Deadline Is June 15th

June 1, 2021

Expatriate Tax Returns 2020 Tax Deadlines

The tax filing deadline for expats is June 15th, 2021. Expats receive an automatic extension on U.S. filings. The IRS has not issued any changes to this deadline this year. Any payments owed for 2020 are overdue to the IRS. If you inadvertently forgot or didn’t know you owed, contact us as soon as possible to speak with one of our tax experts. We can help. The vast majority of our expats do not owe money. Extensions for tax filing (not payment) can be pushed from June 15th to October 15th, contact us to learn more. Please know that even if you don’t owe money, you must file!

Filed Under: Blog Tagged With: expat tax deadline, Expat Tax Filing, Expat Tax Help, Expat Taxes, Expatriate Tax Returns

Recovery Rebate Credit

May 17, 2021

Expatriate Tax Returns Recovery Rebate Credit

Concern and confusion around stimulus check eligibility have been a major topic for U.S. expats. If you are a U.S. citizen or resident with a Social Security number and are within the income brackets, and are not claimed as a dependent by someone else, you qualify for the stimulus checks.

All first and second Economic Impact Payments have been issued by The IRS and Treasury. If you did not receive any Economic Impact Payments or received less than the full amounts, you may qualify for the Recovery Rebate Credit to claim as a credit in lieu of missing stimulus payments for Americans living abroad. If you qualify, you must file a 2020 tax return to claim the credit. Get started!

Filed Under: Blog Tagged With: American Rescue Plan, best expat tax preparers, Expat Tax Filing, expat tax preparers, Expat Taxes, Expatriate Tax Return, Recovery Rebate Credit

Tax Filing Extensions for Americans

May 5, 2021

Expatriate Tax Returns Tax Filing Extensions

Federal tax filings and payments for 2020 are postponed until May 15th, 2021. Expats automatically have until June 15th to file but payments must be made by May 15th. This is to help taxpayers that have been impacted by Covid-19 to have additional time needed to make payments without enduring any penalties. The IRS recommends not waiting until the tax deadline and file as soon as you are able, particularly if you are owed a refund or missed stimulus payments. The IRS tax due date extension applies for Federal taxes only, not State taxes.

If you are unsure of how the recent changes in the tax laws will impact you, please seek professional assistance from our expat tax specialists at Expatriate Tax Returns.

Filed Under: Blog Tagged With: American Rescue Plan, best expat tax preparers, Expat Tax Filing, expat tax preparers, Expat Taxes, Expatriate Tax Return

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