Online US Tax Filing For Expats: 6 Facts That Are Normally Overlooked

Fact 1: You May Still Need To File US State Taxes

A common question that we receive: Do I need to pay state taxes while living abroad? And the answer to that is  – Yes (at least for the most part).

You are still considered a part of that state because of one or more of these reasons:

You return to that state whenever you are back in your home country.
You have a home/permanent residency in that state.
You live in that state for some portion of time during the year.
Your immediate family identifies with that state as their home.
Your driving license, your ID and your voting rights are all tied with that particular state.

Depending on your situation, these reasons justify the need for you to pay your state taxes.

Now, is it unfair? Maybe yes, maybe not. But all in all, it’s still required by the law. Failure to do so can lead to penalties.

However, not all states have the same tax law. There are US states which have reciprocity tax treaties with other countries. This implies that if your home state has a reciprocal agreement with your country of residence, then you won’t have to pay US state taxes because all your state tax obligations will be transferred to your current state of residence.

And if maybe your state of residence abroad doesn’t have a reciprocity treaty, you can always opt to utilize the double taxation treaties such as the FEIE and FTC.

There are also states that spare you from tax obligations completely. This means that if you are not living in that state in the present moment, then you don’t owe them a dime. It doesn’t matter if you have an income abroad or not – you won’t be taxed either way.

Examples of such states are:

South Dakota
Washington State

Fact 2: You Can Claim Relief Through The Child Tax Credit (While Still Abroad)

The Child Tax Credit, commonly termed as CTC, is tax relief/tax credit available to US citizens (and even expats) who have dependent children below the age of 17. Before claiming this relief, you have to prove beyond reasonable doubt (to the IRS of course) that you and your child meet the criteria.

Qualifications For The Child Tax Credit.

1. Your child must be under 17 years by the time the year ends.
2. Your child must have lived with you for at least half an year (though there are some exceptions to this)
3. You must have catered for half of the child’s financial support during the last year.
4. Your child must be a recognized US citizen and must have an accompanying Social Security Number that is valid.
5. You (as the parent claiming the tax relief) must fall within a certain income bracket, because it’s more endeavoured to help parents that are not fully stable.

How Much Relief Do You Get From The Child Tax Credit?

The Child Tax Credit ranges from $2000 to $3000 per child for children over the age of 6.

The same Child Tax Credit ranges from $2000 to $3600 per child for children who haven’t attained the cap of age 6 yet.

CTC is also partially refundable in that, if you didn’t claim it in prior times for one reason or another, then you can still claim it and it will serve to cut down on the taxes you currently owe.

How To Claim The Child Tax Credit?

You can claim it on the Form 1040. You might still need to fill Schedule 8812 (“Credits for Qualifying Children and Other Dependents”) to be submitted alongside the form 1040 form. The Schedule Form helps in figuring your Child Tax Credit figure, and the amount of partial refund you can claim (if you qualify).

Fact 3: If You Retire Abroad, You May Still Have To Pay US Expat Taxes

Retiring abroad doesn’t mean that you are exempted from US tax obligations. In fact, you may have to file a tax return for both your resident country, the US, and at times, you may file US state tax returns as well.

Common Retirees Incomes That Are Tax Deductible.

Any amount withdrawn from a 401(k) account is subject to tax. You are required to report this to the IRS, no matter where you live.

Your dividends will be considered as standard income if they are sourced from the US. In that case, tax will be levied on them as well.

Annuities are fixed sums of money paid to you as a retiree every year. It’s a form of insurance or investment. Annuities are still considered part of your income and thus have to be taxed accordingly.

Gains From A Stock, Bond Or Mutual Fund.
Sale of an asset such as a bond, stock or mutual fund will result in money gain. This will attract taxation depending on how long you held that particular asset. If you had it for less than a year, then it will be taxed as ordinary income. But if you had the asset for over an year, then taxation will be done as per the current long-term capital gains rates.

Fact 4: You Can Have Access To Stimulus Checks If You Already Haven’t

With the dawn of the 2020 CoronaVirus pandemic, the majority of US citizens underwent economic implications. People lost jobs, businesses crumbled, and overall the economy weighed heavily on everyone.

So the US government set up relief financial packages to lessen the burden during the tough times.

These relief packages are termed as Stimulus Checks. The government  has so far released three of these Stimulus Checks. In spring of 2020, was when the first package was sent out.

Most US expats question whether they are eligible for the Stimulus Checks and the simple and open answer is – Yes!

Requirements To Receive The Stimulus Checks

You must have a Social Security Number i.e be a US citizen or green card holder.
You need to be on point with your tax returns.
You should have an adjusted gross income of  $75,000 for individuals, $112,500 for the head of household filers, and $150,000 for married couples. And if your adjusted gross income is above these thresholds, you’ll receive a reduced stimulus check.

Stimulus Checks Payment Amounts

1. First Stimulus Check

$1200 – Individuals or head of households.
$2400 – Married couples who file taxes jointly.
$500 – Dependents who qualify i.e Children below the age of 17.

2. Second Stimulus Check

$600 – Individuals or head of households.
$1200 – Married couples who file taxes jointly.
$600 – Dependents who qualify.

3. Third Stimulus Check

$1400 – Individuals or head of households.
$2800 – Married couples who file taxes jointly.
$1400 – Dependents who qualify.

If you haven’t received your stimulus check, then chances are – you aren’t up to date with your tax filings. Many expats forget to file, or don’t know they need to file. But luckily, the IRS has streamlined procedures that’ll help you catch up, penalty free!

So get caught up with you tax returns (if you haven’t) ,and claim/receive your Stimulus Check(s).

Need Help Filing Your Taxes?

Fact 5: You Can Amend Previous Tax Returns

If thorough revision analysis is done on your tax returns, and the IRS finds that they are incorrect – then you might have a case on your hands. You might be facing possible penalties or even worse: Jail time.

But now, wrong tax returns don’t signal the end. They can be amended. An amended tax return is a revised version of your initial tax return. If you are dubious about your previous tax returns (maybe you made a mistake or omitted crucial information), then you can simply file an amended tax return to solve the issue.

Common Reason For Filing An Amended Tax.

Correcting a mistake.
Claiming tax credits or deductions missing in the prior version.
Changing your filing status.
Adding or removing a dependent.
Updating an income amount.

How To File An Amended Tax Return.

1. Have All The Right Documents.
Before filing an amended tax return, you’ll need to possess some documents to proceed. Like for instance, it’s a must that you have the IRS Form 1040-X to amend your return.

Plus. you’ll also need a copy of the original tax forms you are trying to amend. This might include your Form 1040 among many others.

2. Take Advantage Of Any Tax Deduction At Your Disposal.
Doesn’t matter if it’s your original return or your amended return. Saving money is always welcomed so check for any opportunities available to you and use them to reduce the weight of your tax returns.

3. Fill Out Your Form 1040-X.
Filling out the form is relatively straightforward, though you still have to be careful. Considering this is an amended return, it should be error free and precise.

4. Submit Your Form 1040-X.
Accompanied with all the supporting documents, you will submit your Form 1040-X to the IRS. The normal processing time for an amended return is 16 weeks. Before submitting your amended tax return, it’s advised you first check the status of your original return. This is to ensure that your original return and amended tax return don’t get mixed up. To check the status of your original tax return, simply head over to the IRS website.

Fact 6: Deadlines Should Be Adhered To So As To Not Get Fined

As simple as it sounds, it actually isn’t. Expats forget to file their returns, some don’t know they are required to file, some don’t get their documents in order on time while others blatantly ignore.

But when it comes to taxes and the law, there is simply no excuse. You still have access to privileges from your mother country (like citizenship, ability to vote, protection from deportation) –  so it’s only fair that you pay your taxes accordingly.

The deadline for filing tax returns this year (2023) is April 18, but the US expats are granted an automatic extension of up to June 15. If you owe taxes, work with these set deadlines to avoid getting penalized.

US Tax Pros Will Help Make Your Tax Filing Easy!

We understand that filing taxes can be quite elusive and frustrating for most expats. To help you mitigate all the stress – we can aid you in your tax filing – from start to finish! So reach out today. You don’t have to go through it alone.

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