Living and working overseas as an American expat comes with a unique tax filing position. It can often be complicated and full of hassle. Most tax advisers and tax return preparers are not experienced in the specific nature of expatriate tax returns. The expatriate tax professionals at Expatriate Tax Returns make up a stellar team of CPAs who have decades of experience in expat tax preparation. We’ve compiled some noteworthy updates that expats will be interested in for the coming year.
The past several years were relatively quiet in terms of changes to U.S. tax law in general and expatriate tax law in particular. With a new Administration and a new Congress, there are likely to be a number of substantial tax changes that expats should be aware of as we continue on in this new year.
In past years, the Foreign Bank and Financial Accounts (FBAR) was due by June 30th and extensions were not allowed. For tax year 2016 and forward, however, the FBAR due date is April 15th. There will also be a maximum extension for a 6-month period ending on October 15th. That should be a good development for American expats as it syncs the FBAR due date with the tax return due date. Plus it provides expatriates more time to prepare their information and file both items at the same time.
If you live outside the U.S. on April 17, 2017, you are entitled to an automatic extension (without the filing of an extension form) until June 15. However, if you owe tax, the extension applies only to the tax return filing and not the tax payment. Therefore, you must still submit your payment by April 17 to avoid paying interest on your late payment (late payment penalties do not commence until June 15th).
Expats who need to file an extension (Form 2350) because they need additional time to meet either the bona fide residence test or the physical presence test to qualify for the foreign earned income exclusion and/or the foreign housing exclusion or deduction, such extension is due by April 17th (not June 15th), even if they are outside the United States at that time. For tax year 2016, the maximum foreign earned income exclusion is up to $101,300 per qualifying person ($102,100 for tax year 2017). The maximum foreign housing exclusion for 2016 is $14,182. The standard deduction amounts are: for joint filers and surviving spouses, $12,600 for 2016 ($12,700 for 2017); for heads of household, $9,300 for 2016 ($9,350 for 2017); for singles, $6,300 for 2016 ($6,350 for 2017); and for marrieds filing separately, $6,300 for 2016 ($6,350 for 2017). For 2016 and 2017, the personal exemption amount is $4,050.
Further, under a new law, timing limitations were added for claiming the child tax credit by providing that a taxpayer identification number (an ITIN or SSN) can be used to claim the credit only if it was issued (not applied for) on or before the due date of the return. Finally, the past year was an important one in the U.S. government’s implementation of FATCA. Digital information exchanges began between the U.S. and its partner countries, and the IRS, in turn, has received more and more foreign account information. Many of the FATCA partner countries and their foreign financial institutions (e.g., banks) have made substantial efforts to become FATCA compliant in order to avoid potentially devastating penalties for foreign institutions with significant portfolios of U.S. investments. In this regard, the U.S. government gave a December 31 deadline for countries to implement FATCA locally or lose FATCA-compliant status.
It remains to be seen what tax changes the Trump Administration will make and we will keep you posted. Right now, it’s a wait and see attitude for these changes to the tax code in general and the expatriate tax code in particular.
Remember, due to April 15 being on a weekend, the due date for the 2016 tax return has been moved to April 17, 2017. Due to October 15th being on a weekend, the extension due date for the 2016 tax return (with the filing of an extension form) is moved to October 16, 2017.
Please don’t hesitate to call on us at ExpatriateTaxReturns.com to take the hassle out of your expat tax preparations. Our experience is your best friend! Call us today at 877-382-9123.