Are you an American living abroad?


In 2016, the U.S. State Department estimated that there were 9 million U.S. citizens living abroad, an increase from an estimate of 4 million in 1999. While there is no recent study on this subject, research dating back to 2000 suggests that 0.3 percent of the general population in Turkey consists of U.S. citizens.

There are many families which will specifical­ly arrange for the birth of their children in the U.S. so that these children will have easier access to relatively better schools or will have less trouble travelling the world. What they do not realize most of the time is the fact that these benefits will sometimes come with a hefty price tag.

It is very easy to neglect the fact that you may have certain tax liabilitie­s in the U.S. After all, many countries will break your tax residency once you set up your domicile elsewhere and will only seek to tax you on your earnings that have been generated in that very country.

Not the Un ted States

The same rules for filing income, estate, and gift tax returns and estimated tax liabilitie­s apply to U.S. citizens or resident aliens living abroad, as if they are living and working in the U.S. Your worldwide income is subject to U.S. income tax, regardless of where you reside.

While US citizens who work overseas usually know these requiremen­ts, for dual citizens or other individual­s who are U.S. citizens by birth but have never been in the U.S., this sometimes comes as shocking news.

Failure to comply with the tax and reporting liabilitie­s does not only expose individual­s to unnecessar­y penalties and interest, but it may also make your life miserable if you decide to set up a business in the United States or intend to live there.

Am I requ red to f le a tax return?

Generally, you must file a return for 2017 if your gross income from worldwide sources exceeds the minimum filing thresholds for your filing status. Most commonly, for single taxpayers, this amount is $10,400 while for married taxpayers the amount is doubled to $20,800.

So if you are a dual citizen and you work on a single payroll in Turkey, or have other types of income, it is very likely that you would already exceed these thresholds and would have to file a tax return.

When am I requ red to f le?

If you follow the calendar year, your deadline for tax return submission is April 15.

You are allowed an automatic 2-month extension to file your return and pay federal income tax if, on the regular due date of your return, you are living outside the United States. You generally can get an automatic 6-month extension of time to file but remember that this is not an extension of time to pay.

But I am pay ng taxes here, w ll I be double taxed?

For individual­s who live and work outside the U.S. but continue to have U.S. tax liabilitie­s, there are two very important concepts that helps minimize the impact of double taxation.

Fore gn earned ncome and hous ng exclus on – deduct on

If you meet certain requiremen­ts, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. The exclusion amount for 2017 tax returns is $102,100 of your foreign earnings. In addition, you can exclude or deduct certain foreign housing amounts.

Fore gn tax cred t

As you are living outside the U.S., it is likely that you pay tax on your earnings in the country of your residence. Since the same income will be taxed, to avoid double taxation, the U.S. will allow crediting of foreign taxes against the tax calculated on the same income. Taxes paid for excluded income will not be credited as the income itself is taken out from the total taxable base.

What s FBAR?

The United States is not alone in wanting to monitor its citizen’s wealth, and although the requiremen­ts for this reporting has been around for quite some time, it has become a lot more important over the last few years.

If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, you may have to file an FBAR form.

The deadline for filing the FBAR form is also April 15. However, FinCEN will grant filers failing to meet the FBAR annual due date an automatic extension to October 15 each year.

Un ted States persons are requ red to f le an FBAR f:

The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

Also remember that taxpayers with specified foreign financial assets that exceed certain thresholds must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, which is filed with an income tax return. Those foreign financial assets could include foreign accounts reported on an FBAR. The Form 8938 filing requiremen­t is in addition to the FBAR filing requiremen­t.

What happens f I don’t f le?

FBAR violations may result in civil penalties up to $100,000 or 50 percent of the balance in the account at the time of the violation, for each violation. Failure to file tax returns and/or make tax payments to the IRS on time would separately create failure to file, failure to pay penalties and also interest.

How do I make up the past years?

If you did not know about your liabilitie­s to the IRS and the U.S. Treasury, it is very easy to get overwhelme­d by all of this new informatio­n and think that you have missed the last exit for becoming compliant. You should definitely approach this with care and diligence, and try to be quick about becoming compliant, but you have not missed the chance just yet.

The U.S. offers two different programs for individual­s who wish to retroactiv­ely complete their compliance requiremen­ts: Offshore Voluntary Disclosure Program and Streamline­d filing. These programs are fundamenta­lly different and you should seek profession­al advice to determine which one fits your personal circumstan­ces.

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