The US income tax regulation is defined in the U.S.Code Title 26, Subtitle A, chapters 1 through 6. The Internal Revenue Service acts as the government revenue agent/collector. The IRS enforces the rules and regulations through the collections processes by applying thousands of pages of Revenue codes. Please do not ask me if I read the code (no I didn’t finish it, but I am still reading the most important parts so I, as an accountant, can provide valuable tax services to you.
US citizens are required to report their worldwide income on form 1040 annually if they meet the filing threshold. I can tell you that I am required to file an income tax return as you may be too unless you fall under the exception rules. Even though you are not a U.S. citizen or permanent resident (Green Card holder), you may have income tax filing requirements because of your substantial presence in the US or your US source income or ownership of an interest in U.S. partnerships. Many foreign nationals do have investments in the US either in real property or financial assets, or some other means of sophisticated investment vehicles. Hence, they may need to have reporting requirements.
You may also have to file a U.S. income tax even if you are living and/or working outside of the U.S and you have not revoked your U.S. citizenship or your green card.
The United States requires you to file an income tax return and report your worldwide income (US and foreign source income). Of course, there are many rules that apply, so that you can exclude some or all your income from your US taxation or take a tax credit for taxes paid to foreign governments. To utilize and to benefit from the foreign earned income exclusion or the foreign tax credit, you must submit a US tax return, form 1040.
You report your worldwide income annually on the IRS Form 1040 with all applicable attachments: schedules, forms, and statements, including required international informational disclosure forms. A U.S. person required to file a tax return may also have an obligation to submit FBAR Form Fincen114 to the US treasury if required.
To sum up, it is likely that if you are reading this, then you may need to file a U.S income tax return even if you have zero tax liability and meet the income filing threshold for your filing status and age.
The following IRS interactive tax assistant website can assist you in determining whether or not you have a tax filing requirement: https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
For further information, please get in touch with your certified public accountant at Whin Global, fill out this contact form, or email us at info@whinglobal.com
Summary:
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.