If you haven't filed before, as of September 2012, look at IRS's New 'Streamlined' Filing Compliance Procedures for 'not yet' filers
Beginning this fall, in part in response to some of the lobbying of Overseas American Organisations, there are some new 'expedited ' filing guidelines for 'low risk' overseas US tax persons. We have been hearing conflicting reports about whether it is more advisable to join the Offshore Voluntary Disclosure Program or to follow these new expedited procedures, so always
seek professional tax advisor advice!
Here is a recent blog post on this new procedure from our Platinum Sponsor US TAX & FINANCIAL click for blog link
For details of the 2012 Offshore Voluntary Disclosure Program click here
For our Sponsor's explanation of the new as of Sept 2012 procedures & who they apply to click here
For an IRS overview of who should use which procedure click here
Did you know that US ' tax persons' & citizens are subject to tax & may have to file US tax information forms even if they have no earned income, already pay taxes in their country of residence, are below the foreign earned income exclusion, and/or give money away? You also may have to file an information form if you receive a gift of money or inheritance from a foreign citizen or corporation.Thresholds for non filers are very low, so check before you assume you don't have to file paperwork in the US!
The Consequences of Working Abroad:
Social Security, Medicare & Obamacare Taxes
In general, US Social Security & Medicare taxes still apply to what you earn for services performed as an employee or independent contractor outside the US. When do they apply? click here for the IRS link
For an update on what this may mean for the new Obamacare taxclick here
. Our sister Organisation ACA has posted that this is not the case, but tax advisors are urging caution on this issue.
Employee or Independent Contractor?
How are you to determine whether you are an employee or an independent contractor?
This has enormous consequences for overseas Americans because if you are deemed to be independent contractor you will have to not only file all of the tax forms that are already due, but also subscribe to and pay into the U.S. Social Security system as well, sometimes even if you are required to pay into Social Security in your country of residence. The links above will help you sort out where you stand & if you owe, but as with all of this, consult your tax professional & ask questions! Not knowing is no longer an excuse!
Self Employed Overseas ??here is what the IRS expects you to do:
" Who Must Pay Self-Employment Tax?
If you are abroad and you are a self-employed U.S. citizen or resident you generally are subject to the self-employment tax. This is a social security and Medicare tax on net earnings from self-employment of $400 or more a year. Your net self-employment income is used to figure your net earnings from self-employment. Net self-employment income usually includes all business income less all business deductions allowed for income tax purposes. Net earnings from self-employment is a portion of net self-employment income. This amount is figured on Schedule SE. The actual self-employment tax is figured on net earnings from self-employment.
Effect of Foreign Earned Income Exclusion
You must take all of your self-employment income into account in figuring your net earnings from self-employment, even income that is exempt from income tax because of the foreign earned income exclusion."
Foreign Retirement Accounts
There has been somewhat of a reprieve regarding Foreign Retirement plans! From the IRS web pages: ' In addition, retroactive relief for failure to timely elect income deferral on certain retirement & savings plans where deferral is permitted by relevant treaty is available through the new streamlined filing compliance process. The proper deferral elections with respect to such arrangements must be made with the submission.'
See ' New Streamlined Filing Procedures' link above for more information and consult your tax professional, or our sponsor for more help.
For helpful IRS info & links re Foreign Retirement PlansClick Here clickhere
FBARs & 8938 'Information' Forms
US tax persons, regardless of where they live & if they owe tax, must file Information forms on all financial accounts & assets they hold in foreign countries.Important enough to repeat: 'regardless of whether or not they owe tax to the US government'
(the non extendable DEADLINE for FBARs to the Treasury is June 30) & NEW this year, Form 8938
detail all overseas financial interests. The new Form 8938, Specified Foreign Financial Assets
is due to the IRS with your tax return ( included in any extensions). Click here for more on Form 8938 click here if you work for a foreign company Click here for Form 8938 how tos