Are you required to file a U.S. tax return?
Updated: Feb 12
Americans living or working outside of the United States must file a U.S. income tax return unless you do not meet the filing requirements based on the current IRS regulation. The United States tax system is based on citizenship and not residency. However, if you have relinquished your US citizenship or surrendered your green card and if you are not physically living in the US the year after you file your last tax returns and expatriation forms, then you are not required to file a US tax return.
Anyone with US income over the filing threshold is generally required to file a US tax return unless exempted by US domestic tax laws or income tax treaties.
US expats living overseas and foreign nationals living in the U.S. are taxed the same way as US citizens living in the U.S. Income tax is imposed on their worldwide income. This income includes all taxable compensation (wages, bonus, fringe benefits, allowances, imputed employer-provided benefits, foreign pension contributions, etc..), interest, dividends, capital gains, rental income, self-employment, freelance income, retirement, gambling winning, etc. This applies to expats on assignment or to those who are permanently relocated and living overseas (outside of the US) as well all as American citizens or green card holders living abroad and locally employed or not.
For most individuals on assignment, their employer is generally responsible for the tax on compensation beyond their hypothetical income and are more likely to be tax equalized. Therefore, a year-end tax reconciliation should be completed with their annual tax return to determine the net tax settlement between the company and the expat. We encourage you to discuss this with your employer/employee, tax services provider, etc.
The above discussion is just a few general ideas to keep in mind while living /working in your current host countries or thinking about moving or traveling abroad either temporarily or permanently.