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5 FAQs on tax compliance for expats

Living outside the U.S. can have many benefits, both cultural and financial. But in terms of complying with U.S. tax laws, expatriates carry more burdens, not fewer, than taxpayers who live in the U.S.

In this post, we will use a Q & A format to address the issue of tax compliance for U.S. citizens who live abroad.

How many U.S. citizens live abroad?

In round numbers, about 9 million American citizens live overseas, according to the U.S. State Department.

Is the filing deadline the same as for expatriates as for taxpayers who live in the U.S.?

Generally yes. This year, the filing deadline for income tax returns was April 18. With an automatic extension, this date can be pushed to October 15.

There are, however, certain special extensions available to taxpayers who are serving in the military or live outside of the U.S.

If you have overseas accounts, it is also important to be aware that the individual income tax filing deadline is not the only filing requirement you may face. For accounts worth at least $10,000 at any point in the year, you must also file an annual Report of Foreign Bank and Financial Accounts (FBAR, also called FinCEN Form 114).

Is the filing deadline for FBAR the same as for individual income taxes?

Yes, it is this year, for the first time. As we explained in our April 15 post, the FBAR filing deadline used to be June 30, but has now been moved up to coincide with the deadline for individual income taxes.

What are some of the complicating issues that arise in taxing foreign income?

We discussed one of those last week, in a post on the foreign earned income exclusion. For FBAR reporting, there can be issues as to whether someone who merely has signature authority over an offshore account still needs to file.

How often do expatriates renounce their citizenship due to concerns about the burdens of tax compliance?

Citizenship renunciation has been going up in recent years. In 2014, a record 3,415 renounced their passports. In 2015, the number was up again, to 4,279.

In part, it may be due to the increased compliance complexity brought by the Foreign Account Tax Compliance Act (FACTA). The threats of serious penalties under FATCA and stepped-up enforcement of offshore reporting requirements are also an important factor to consider.

In an upcoming post, we will address the reasons for the increase in citizenship renunciation.

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