Your journey has just begun! You’ve decided to start teaching overseas, and although you may have left the US mainland, your US tax obligations still remain. This post by Ines Zemelman from Taxes For Expats will go over the basic tax information you need to know as an American educator abroad.
WHAT DO I NEED TO KNOW FIRST?
You must still file a US tax return even if you do not live in the states.
If you are a US citizen or Green Card holder, you must (assuming you meet the minimum filing thresholds) file an annual tax return reporting your worldwide income. Have a look at this table of minimum filing requirements for the 2017 tax year.
|Filing Status||Age||Minimum Income Requirement|
65 or older
|Married Filing Separately||Any age||$4,050|
|Head of Household||Under 65
65 or older
|Married Filing Jointly||Under 65 (both spouses)
65 or older (one spouse)
65 or older (both spouses)
|Qualifying Widow(er) with Dependent Children||Under 65
65 or older
Although you have to file, you likely do not have to pay.
The good news is that most American teachers abroad don’t end up paying any taxes to the IRS. There are many tax deductions available which allow taxpayers to deduct more than $100,000 from their taxable income. But – they must continue to file. Failure to do so can lead to penalties.
Financial reporting requirements.
Aside from filing returns, you may also be subject to FBAR and FATCA (Form 8938) filing requirements. These forms do not generate tax due, but are simply informational — do not ignore these! Failure to file these informational forms may generate large penalties. FBAR is filed with the treasury and is required if the sum of your non-US accounts exceeds $10k USD at any point in the year. FATCA (form 8938) has higher thresholds (depends on where you live and what your marital status is – see our full guide link above), and is filed as part of your tax return to the IRS.
WHEN ARE TAX RETURNS DUE?
June 15 is the filing due date.
For those working abroad, the first and most straightforward difference is the date when your tax return is due. If you reside abroad on tax day, April 15, you are eligible for an automatic extension to file until June 15. If you would like, you can also apply for an additional extension to file until October. Now – although you can file later with the extension, if you do wind up owing tax, interest will begin to accrue from April 15.
Note – starting in 2017, the date for FBAR is April 15 as well, but with an automatic extension through Oct 15.
WHAT TOOLS ARE AVAILABLE TO REDUCE POTENTIAL TAX DUE?
Exclude $100k of taxable income
Foreign Earned Income Exclusion (FEIE) – The foreign earned income exclusion (FEIE) is the amount you can deduct from your foreign taxable income, during the course of filing your tax return, to reduce the tax you may owe. Ie – if you make 75k USD, you likely don’t owe tax, but you still have to file. Until you file and properly utilize the FEIE – it is not granted to you.
No double taxation
Tax paid to another country can be utilized via the – Foreign Tax Credit,
Do you rent your apartment?
You can deduct that, too. The Foreign Housing Exclusion allows you to further reduce your taxable income if you reside abroad.
WHAT DOCUMENTS DO I NEED TO FILE MY EXPAT RETURN?
Unlike a U.S. employer which will issue a W-2, which will be sent to the IRS and to you, your foreign employer will not provide you with such a form (and even if there is a local tax declaration, it does not get forwarded to the IRS). As such, you should keep accurate records of your finances.
Similarly, you do not need to send the Treasury your bank receipts for your FBAR, but you should maintain records.
If you do not have reliable mail in your location, you should be wary of using a US address on your return, as that may trigger unwanted letters from state tax authorities trying to claw back income that you have earned outside of their jurisdiction. You can look into a virtual mailbox for these matters. Please see Expats & State Taxes as well as Virtual Mailbox & Why You Should Have One
WHAT ABOUT MY FAMILY? I AM MARRIED TO A NON-US PERSON AND HAVE CHILDREN.
You do not have to include your non-US spouse on your US tax return if you do not want to. There are instances when it may be beneficial to do so, but in general you simply need to claim you are married (you cannot file single if you are married – only married filing jointly, married filing separately, or head of household).
If you have children who have a social security number, you may also be eligible for a refundable child credit, over $1000 per child.