Income Tax Preparation For Expatriates And Us Taxpayers Living Abroad

By: John Harman

Almost all U.S. taxpayers living abroad need assistance from a Certified Public Accountant when they calculating their taxable foreign income.

Expatriates and overseas U.S. Taxpayers have completely different tax forms to fill out as well as a handful of unique questions for their CPA.

Common questions include:

• Is the Foreign Tax Credit available to me?
• What is the housing allowance?
• How does the IRS figure days outside of the country for the Foreign Exclusion?
• What is the bona fide residence test and the physical presence test?

The best tax preparers who can answer these questions are Certified Public Accountants. They can guide you through IRS Form 2555, Form 1040NR and Form 1116. Most individuals can read and study the IRS rules and forms, and still not understand and calculated accurately the one that is best for them! This is why having an experience tax preparation professional is essential when filing your taxes as an overseas U.S. taxpayer.

Many United States citizens earn money from foreign sources. It is essential that these tax payers report all such income on their tax return, unless it is exempt under federal law.

U.S. citizens are taxed on their worldwide income. This applies whether a person lives inside or outside the United States. The foreign income rule also applies regardless of whether or not the person receives a Form W-2, Wage and Tax Statement, or a Form 1099 (information return).

Foreign source income includes earned and unearned income, such as:

• Wages and tips
• Interest
• Dividends
• Capital Gains
• Pensions
• Rents
• Royalties

An important point to remember is that citizens living outside the U.S. may be able to exclude up to $91,400 of their 2009 foreign source income if they meet certain requirements. If married and both individuals work abroad and both meet either the bona fide residence test or the physical presence test, each one can choose the foreign earned income exclusion. Together, they can exclude as much as $182,800 for the 2009 tax year. However, the exclusion does not apply to payments made by the U.S. government to its civilian or military employees living outside the U.S.

Article Source: http://yourfinance.co.za

About The Author
John Harman is a corporate and personal tax preparer from McKinney TX. With over 25 years of experience as a certified public accountant, he is more than qualified to handle tax returns for expatriates and U.S. Taxpayers abroad. Call or write us for more information, or check out IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.