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Frequently Asked Tax Questions And Answers
Keyword: U.S. Citizen Abroad
1.7 IRS Procedures: Extensions
If I won't be able to finish my return by April 15, can I get an
extension?
Yes. You can get an extension by filing Form 4868 (PDF), Extension of Time To File U.S. Individual Income Tax Return,
by the due date. By filing the extension, you avoid the late filing penalty.
However, Form 4868 does not extend the time to pay your income tax. For more
details, refer to Tax Topic 304, Extensions of Time to File Your
Tax Return.
Special rules apply to U.S. citizens and residents whose home and main
place of business or post of duty are outside the United States or Puerto
Rico on the return due date, April 15. For more information, refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
References:
- Publication 54, Tax Guide for U.S. Citizens and Resident
Aliens Abroad
- Form 4868 (PDF), Extension of
Time To File U.S. Individual Income Tax Return
- Tax Topic 304, Extensions of Time to File Your Tax
Return
I am filing my U.S. tax return from the U.K. and am eligible for
the automatic 2-month extension. Do my forms need to be in Philadelphia by
June 15th, or do they just need to be postmarked by June 15th?
Your return must be postmarked by June 15.
References:
I will be vacationing overseas on April 15. Since I will be out
of the country, do I qualify for the automatic 2-month extension?
No. You are allowed an automatic 2-month extension (until June 15, if you
use a calendar year) to file your return and pay any federal income tax that
is due if you are a U.S. citizen or resident, only if:
You are living outside of the United States and Puerto Rico, and your
main place of business or post of duty is outside the United States and Puerto
Rico, or
you are in the military or naval service on duty outside the United States
and Puerto Rico
Vacationing is a temporary status that does not meet the criteria for the
automatic 2-month extension.
References:
- Form 4868 (PDF) , Application
for Automatic Extension of Time to File U.S. Individual Income Tax Return
6.2 Social Security Income: Canadian & Foreign Treaties
For an American citizen residing in Canada using Form 1040A, should
the taxable amount of U. S. social security benefits shown on line 14b be
$0.00 due to the Canada-U.S. tax treaty?
Under the 1997 protocol to the Canada - U.S. tax treaty, the Canadian and
US governments agreed to return to a residence-based system under which social
security benefits are taxable exclusively in the country where the recipient
resides. As a result, the entry for line 14b would be $0.00.
References:
- Publication 597, Information on the United States-Canada
Income Tax Treaty
- Publication 915, Social Security and Equivalent Railroad
Retirement Benefits
- Tax Topic 423, Social security and equivalent railroad
retirement benefits
13.1 Aliens and U.S. Citizens Living Abroad: Canadian & U.S. Tax Issues
I am a U.S. citizen. If I move to Canada to live and work there as a Canadian
permanent resident, do I pay both U.S. and Canadian Taxes?
United States citizens living abroad are required to file annual U.S. income tax
returns and report their worldwide income if they meet the minimum income filing requirements
for their filing status and age. You must contact the Canadian Government to determine
whether you must file a Canadian tax return and pay Canadian taxes. For the United
States income tax return, you will have several options available to you regarding
claiming a foreign tax credit or excluding some or all of your foreign earned income.
References:
Are the Canada Pension Plan and Canadian Old Age Security Benefits taxable?
If they are, please tell me where they should be entered on Form 1040.
Benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and
Old Age Security (OAS) program to a U.S. resident are taxable, if at all, only in
the United States. According to the U.S. - Canada income tax treaty, taxation of these
benefits is based on residence. U.S. citizens or green card holders who reside in
Canada are not subject to U.S. tax on this income.
These Canadian benefits are treated as U.S. social security benefits for U.S.
tax purposes. Thus, under section 86 of the Internal Revenue Code, the portion of
the benefits that is taxable will depend on your income and filing status. If your
modified adjusted gross income is above certain limits, a maximum of 85% of your benefits
will be subject to U.S. tax. Refer to Tax Topic 423 for information about determining
the taxable amount of your benefits. Any benefit under the social security legislation
of Canada that would not be subject to Canadian tax if paid to a resident of Canada
is not subject to U.S. tax.
Canadian benefits that are treated as U.S. social security benefits are reported
on line 20a and 20b of Form 1040, U. S. Individual Income Tax Return or line 14a and
14b of Form 1040A.
References:
I am a U.S. citizen who lived in Canada and invested in Registered Retirement
Savings Plans (RRSPs) which are similar to IRAs. Under the Canada - U.S. Tax Treaty,
I am not sure how to treat the income on these investments. Is the income tax deferred
or must it be claimed as earned?
Although Canadian registered retirement savings plans are similar to individual
retirement accounts (IRAs), they do not meet the requirements for qualification as
IRAs under section 408(a) of the Internal Revenue Code. As a result, the earnings
of such a plan are includable currently in the gross income of the beneficiary of
the plan for United States income tax purposes. Whether or not the earnings are distributed.
However, a beneficiary of certain Canadian retirement plans may elect for a tax year
(the current year) to defer United States income tax on certain current-year earnings
of the plan that are not distributed to the beneficiary. An election to defer is made
by the beneficiary attaching to the beneficiary's United States federal income tax
return, a statement that contains for each plan the information specified in Revenue
Procedure 2002-23 , 2002-15 I.R.B. 744, or in any future Revenue Procedure that
supersedes Rev. Proc. 2002-23. Additional filing requirements are detailed in Notice
2003-25, 2003-18 I.R.B. 855 and Notice 2003-57, 2003-34 I.R.B. 397.
You can also download the most recent Internal Revenue Bulletins by visiting our Tax Info For Business section.
References:
- Publication 597, Information on the United States - Canada
Income Tax Treaty
- Revenue Procedure
2002-23, 2002-15 I.R.B. 744 (April 15, 2002), Notice 2003-25, 2003-18
I.R.B. 855 (May 5, 2003), Notice 2003-57, 2003-34 I.R.B 397
13.3 Aliens and U.S. Citizens Living Abroad: Foreign Income & Foreign Income Exclusion
What is foreign earned income? Is it income from a foreign source or income
paid by a U.S. company while living abroad?
Earned income is pay for personal services performed, such as wages, salaries,
or professional fees. Foreign earned income is income you receive for services you
perform in a foreign country during a period when your tax home is in a foreign country
and during which you meet either the bona fide residence test or the physical presence
test. It does not matter whether earned income is paid by a U.S. employer or a foreign
employer. Foreign earned income does not include the following amounts.
The previously excluded value of meals and lodging furnished for the convenience
of your employer.
Pension or annuity payments including social security benefits.
Payments by the U.S. Government, or any U.S. government agency or instrumentality,
to its employees.
Amounts included in your income because of your employer's contributions to a
nonexempt employee trust or to a nonqualifying annuity contract.
Recaptured unallowable moving expenses
Payments received after the end of the tax year following the tax year in which
you performed the services that earned the income.
References:
Do I have to meet the 330-day presence test or have a valid working resident
visa to meet the requirement for foreign income exclusion?
To claim the foreign earned income exclusion, the foreign housing exclusion, or
the foreign housing deduction, you must have foreign earned income, your tax home
must be in a foreign country, and you must be one of the following:
A U.S. citizen who is a bona fide resident of a foreign country or countries for
an uninterrupted period that includes an entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the
United States has an income tax treaty with a nondiscrimination article in effect
and who is a bona fide resident of a foreign country or countries for an uninterrupted
period that includes an entire tax year, or
A U.S. citizen or a U.S. resident alien who is physically present in a foreign
country or countries for at least 330 full days during any period of 12 consecutive
months.
U.S. tax law does not specifically require a foreign resident visa or work visa
for this purpose, but you (must/should) comply with the other country's laws.
References:
13.4 Aliens and U.S. Citizens Living Abroad: Nonresident Alien - General
I live in a foreign country. How do I get a social security number for my
dependent who qualifies for a social security card?
Use form SS-5-FS which may be obtained from the Social
Security Administration
References:
My spouse is a nonresident alien. How can I get a nonworking social security
number for her?
Each foreign person who does not have and cannot obtain a social security number
must use an IRS Individual Taxpayer Identification Number (ITIN) on any U.S. tax return
or refund claim filed. For additional information on ITINs click on Individual
Taxpayer Identification Number.
References:
13.7 Aliens and U.S. Citizens Living Abroad: U.S. Citizens Overseas
I am a U.S. citizen working abroad. Are my foreign earnings taxable?
A U.S. citizen or resident alien is generally subject to U.S. tax on total worldwide
income. However, if you are a United States citizen or a resident alien who lives
and works abroad, you may qualify to exclude all or part of your foreign earned income.
For specific information, refer to Tax Topic 853, Foreign Earned Income Exclusion
- General.
If you would like more information on who qualifies for the exclusion, refer to Tax Topic 854, Foreign Earned Income Exclusion - who qualifies. For more information
on what type of income qualifies for the exclusion, refer to Tax Topic 855, Foreign
Earned Income Exclusion - what qualifies. You may also wish to refer to Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for a
detailed discussion.
If the information you need relating to this topic is not addressed in Publication
54, you may call the IRS International Tax Law hotline. The number is (215) 516-2000.
This is not a toll-free number.
References:
I live in a foreign country. Where can I find local tax assistance and forms?
The IRS has a full-time permanent staff in 6 U.S. Embassies. These offices have
tax forms and publications, can help you with account problems, and answer your questions
about notices and bills. For more information about these offices, please refer to www.irs.gov under "Contact My Local Office."
In addition, most U.S. Embassies stock the more commonly used tax forms and publications,
and sponsor speaking tours by IRS employees during filing season.
I am a U.S. citizen and married a nonresident alien last year. At that time,
we filed an application with the Bureau of Citizenship and Immigration Services (BCIS,
formerly INS) for my spouse's adjustment of status. We plan to file married filing
jointly. Will I need to use Form 1040NR?
As a U.S. citizen, you cannot file Form 1040NR (PDF), U.S.
Nonresident Alien Income Tax Return. If you make an election to file a joint
return with your nonresident alien spouse (your spouse must, in turn, elect to be
taxed as U.S. resident), file Form 1040 (PDF), U.S. Individual
Income Tax Return (or Form 1040A (PDF) or Form 1040EZ (PDF) if otherwise applicable), and report both incomes from worldwide sources.
You will need to get an ITIN for your spouse. To apply for an ITIN, file Form W-7 (PDF), Application for IRS Individual Taxpayer Identification
Number.
References:
- Form 1040NR (PDF), U.S. Nonresident
Alien Income Tax Return
- Form 1040 (PDF), U.S. Individual Income
Tax Return
- Form W-7 (PDF), Application for IRS Individual
Taxpayer Identification Number
- Tax Topic 857, Individual Taxpayer Identification Number -
Form W-7
I worked out of the country for one year. Do I have to pay U.S. income
tax?
As a U.S. citizen, your worldwide income generally is subject to U.S. income tax,
regardless of where you are living. However, you may qualify for the foreign earned
income exclusion, foreign housing exclusion or foreign housing deduction, or the foreign
tax credit. These tax benefits can reduce or eliminate the U.S. tax you would otherwise
have to pay on your foreign income.
References:
I am a U.S. citizen working for a U.S. firm in a foreign country. Is any
part of my wages or expenses tax deductible?
U.S. citizens are taxed on their worldwide income, no matter where they work. Some
taxpayers may qualify for the foreign earned income exclusion, foreign housing exclusion,
or foreign housing deduction, if their tax home is in a foreign country and they were
either a bona fide resident of a foreign country or countries for an uninterrupted
period that includes an entire tax year, or were physically present in a foreign country
or countries for at least 330 full days during any period of 12 consecutive months.
If the taxpayer is temporarily away from his or her tax home in the United States
on business (less than a year), the taxpayer may qualify to deduct away from home
expenses (for travel, meals, and lodging ) but would not qualify for the foreign earned
income exclusion.
References:
I am a U.S. citizen living and working overseas. Can I have a tax credit
on my U.S. taxes for the taxes I pay to the foreign country?
The foreign tax credit is intended to relieve U.S. taxpayers of the double tax
burden when their foreign source income is taxed by both the United States and the
foreign country from which the income is derived.
Generally, only income taxes paid or accrued to a foreign country or a U.S. possession
qualify for the foreign tax credit. You can choose to take the amount of any qualified
foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized
deduction.
To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit and attach it to your Form 1040. You may
claim credit without attaching Form 1116 if all of your foreign source income is passive
income (such as interest and dividends) reported to you on a payee statement and the
total amount of qualifying foreign taxes you paid or accrued is not more than $300
($600 in the case of a joint return) and is also reported to you on a payee statement.
To choose the deduction, you must itemize deductions on Schedule A, Form 1040.
You may not take either a credit or a deduction for taxes paid or accrued on income
you exclude under the foreign earned income exclusion or the foreign housing exclusion.
There is no double taxation in this situation because the income is not subject to
U.S. tax.
References:
13.8 Aliens and U.S. Citizens Living Abroad: Other
How much money can I bring in to the U.S.?
There is no limit on the total amount of monetary instruments which may be brought
into or taken out of the United States, nor is it illegal to do so. However, if you
transport or cause to be transported (including by mail or other means) more than
$10,000 in monetary instruments on any occasion into or out of the United States,
or if you receive more than that amount, you must file Form 4790 (PDF), Report of International Transportation of Currency or Monetary Instruments
with U.S. Customs (Currency & Foreign Transactions Reporting Act, 31 U.S.C.
1101, et seq.). Failure to comply can result in civil, criminal and/or forfeiture
penalties.
Monetary instruments include U.S. or foreign coin in current circulation, currency,
travelers checks in any form, money orders, and negotiable instruments or investment
securities in bearer form. A transfer through normal banking procedures which does
not involve the physical transportation of monetary instruments is not required to
be reported.
References:
- Form 4790 (PDF), Report of International
Transportation of Currency or Monetary Instruments with U.S. Customs (Currency &
Foreign Transactions Reporting Act, 31 U.S.C. 1101, et seq.)
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