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  • Writer's pictureWhin Global

Are American expats required to file a U.S. tax return?

Updated: May 16, 2022

Generally, American citizens who live and/or work outside of U.S. may not know that they are required to file an U.S. individual income tax return or not.

Here is a list of six reasons that indicate whether or not you are required to file an individual income tax return. The list below is only a few items from the many reasons why someone should file a U.S. tax return.

1. Are you a US citizen or a permanent resident? If your answer is yes, then you are subject to US income tax filing, no matter where you live, if your worldwide gross income is at least equal to the threshold amount for your filing status and age. The income threshold depends on your filing status, age, and/or if you are dependent of a taxpayer or not. Do I need to file a tax return?

Believe it or not, but many Americans expats think that they are not required to file a tax return because their foreign earned income is less than the maximum exclusion under the FEIE or the foreign tax rate is higher than the US one. No - you must file to benefit for the exclusion and/or the FTC.

2. If you expatriated (Renounced your US citizenship or Long Term Permanent Residency), you must file the year of the repatriation and all tax returns are due immediately prior to the expatriation to take effect.

Under the IR-2019-151, the IRS announces new procedures relief for expatriated Americans. Provided that the taxpayer's tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. Penalties and interest will not be assessed for eligible individuals who meet all 6 prong tests and use this relief procedure.

3. If your net self-employment income is at least $400, then generally yes must file a tax return and you are subject to FICA/Medicare.

But if you a resident in a country where the US has a Totalization agreement (social security agreement) then you may be exempted from US SE tax if you are required to and you contribute to the foreign country system. Here is the list of countries the United States has social security agreements with.

4. If you are not a US citizen or green card holder, if you are married to a US citizen and previously elected (6013(g)) to be a US resident while living overseas, you must a file a joint tax return with your united states citizen or permanent resident spouse unless the election 6013(g) is revoked. Both spouses worldwide income must be reported the joint U.S. income tax return.

Yes, once the election to file a joint return is made with a nonresident spouse, a joint return must be filed unless revoked. Of course, this is assuming you are required to file a return with you.

5. A US tax non-resident must file a US income tax return if s/he has US source income. An existing tax treaty can be utilized to exempt certain income from taxation if applicable, and certain conditions met.

6. If income tax is withheld from your U.S. compensation and you received an official annual IRS statement/form, then there is a sign that the IRS is expecting a tax return to be filed. If you have not submitted a tax return, the IRS may compute a substitute return based on your wages and income reported to the internal revenue service. For most missed reporting of 1099-B, the IRS will not take into consideration your basis if they are assess tax. So, it is important that you check what the IRS says and your records prior to paying any tax liabilities.

The Internal Revenue Services may send you a tax notice that generally requires a response within 30 days.

Is there any penalty for noncompliance?

The penalties for not filing a US income tax return may be substantial if you owe taxes and have not filed your tax returns on time. Generally, there is no statute of limitations if you didn't file a tax return with the IRS for that year. See our FAQs page for the failure to file penalties for various late or non-filed tax and disclosure forms such as FBAR, forms 8938, 5471, 352, etc.