While abroad, the last thing you want to worry about is filing your taxes and having to do them right. When this is an issue, it is important that you take the necessary steps required to file your taxes and file them correctly.
Having an idea of what to do and how to do it while abroad is great advice to have. Of course, speaking with a professional tax expert that understands tax laws abroad is also ideal. However, for those that want to do their own accounting and taxes, it is good to have some tips and tricks in mind while doing so.
Even if you live in another country, you still are liable for taxes in your home country.
This is a common misconception that so many have regarding their tax filing status. Just because you reside in another country does not mean you are not still a resident of your home country. Due to this, many people fail to file the right taxes. The taxes to your home country must be paid if you are not a resident of the country you reside in.
You may still have to pay taxes in the country you reside in, as well.
Some countries require those living and working within them to pay their taxes, as well as those from their home country. This is on a country by country basis, though. You may or may not be liable for them depending on the specific country.
Use the option for Foreign Earned Income Exclusion to save some extra cash.
This is an option that not many know about, but when you are overseas then you can save some extra cash on the money that you are bringing in. You just have to qualify for one of the two tests that they give such as being physically present inside a foreign country for at least a year or another. If you qualify, you can exclude up to $100,000 of your foreign income from this taxation year.
There is also a Foreign Tax Credit available.
This is a credit that helps you save money because it shows that you already paid a large amount to another country. This will then offset the amount that you pay to your own home country because of the amount you have had to pay to the one you are currently residing in.
Use your housing costs while filing from abroad.
The Foreign Housing Exclusion can help to offset some of the living expenses that you have to pay while living overseas. You have to qualify for the previously mentioned Foreign Earned Income Exclusion in order to qualify for it, but once you do, then you can offset some more costs and cut down on the amount you pay back in taxes. There are exclusions and limits that change each year, so it is good to keep up to date with these changes.
Always file on time, every time to reduce interest and fees that might incur otherwise.
The deadlines continue to change each year, so it is important to know when they are going to change before you decide to file. Filing on time can save you not only money, but also headache. It is a reporting requirement that you need to follow through with and if you miss it then this means getting fees that you would otherwise not have to pay.
FATCA and FBAR are both real things that need to be filed for.
Even though you might have never heard of them before, both of these are required when filing your taxes. When you are living in another country then it is important that the taxes from your home country are filed and these taxes include both of these papers in them. If you are unsure of what these are, it is best to speak with someone that will walk you through the process of filing them.
Using accounting experts that understand the specifics that go with filing taxes for expats is a must. Not only does this take the burden off of your shoulders, but it ensures that they are done right and are put in on time. Speak with an accountant that can walk you through the process or go through all of the paperwork for you. They are there to help so that you do not have to pay too much back, while also enjoying your stay in another country at the same time.
