Common Myths About Tax for Expats

Misinformation is a big problem in the world of expat tax. Many people who live or work overseas believe different myths and misconceptions about when, how, and how much tax to pay. Today, we want to go through some of the most common myths about tax for expats ( www.EsquireGroup.com/tax-for-expats ) and set the record straight.

Myth #1: You Only File Taxes in Your Current Country

Many people living and working overseas believe that, since they are earning an income in a foreign country, they do not need to file tax for expats with the IRS in the States. This simply isn’t true. In fact, the IRS mandates that almost every American citizen working overseas also files taxes at home. There are, of course, exceptions, but these are so few and far between that you likely need to file taxes at home. The good news is, however, that most people do not need to pay additional tax when filing with the IRS, and an experienced tax firm can help you take advantage of every rule and regulation to keep the additional taxes you pay to a minimum.

Myth #2: Foreign Bosses Mean Paying Foreign Taxes

Some people in the States live at home but work for a foreign employer, and they then think that they don’t need to pay tax for expats in the States since their income is coming from elsewhere. The IRS, however, considers where the employment is taking place as the location of the income, not where the money comes from, so it’s important to file your taxes at home when working in the States (and working overseas, for that matter).

Myth #3: If I’m Below the FEIE, I Don’t Need to File

The Foreign Earned Income Exclusion, for FEIE, is a certain amount of income that is exempt from taxes in the United States for people living and earning an income overseas. The amount changes slightly every year, but in 2018, the amount is $104,100. Many people assume that, if they earn under that amount, they do not need to file tax for expats with the IRS. This is simply not true. In fact, the IRS still requires you to file taxes when your income is below that amount.

Myth #4: US Income for US Taxes

This one is perhaps the most common misconception for people who draw incomes from foreign nations and in the United States, and it makes sense in its own way. But all income must be reported to the IRS, not just income earned in the United States. If you are an expat and you need to file taxes with the IRS, it pays to consult an experienced and professional accounting firm that specializes in tax for expats. With the right guidance, you can ensure that you remain compliant with all rules, regulations, and expectations ( www.EsquireGroup.com/about ), all the while paying the right amount of tax and avoiding any fines or penalties. With the right accounting firm working for you, the many myths and misconceptions about expat taxes won’t affect you or your tax returns.