Frequently asked questions about American tax returns
1. Are green card holders considered to be resident aliens?
Yes – if you have been lawfully admitted to the U.S. for permanent residency you are considered to be a resident alien, even if you are currently living outside of the U.S. Please see the Green Card page.
2. Who must file U.S. Federal tax returns?
U.S. citizens and resident aliens (i.e. green card holders) are taxed on their world-wide income regardless of where it is earned, paid, or received. But by living abroad you get certain tax benefits that are not available in the U.S. Nonresident aliens (e.g. an individual without permanent residency in U.S.) are subject to tax only on their U.S. source income.
3. Suppose I work for a foreign company?
If you work for a foreign company, you still need to report your income, and it has to be in U.S. Dollars. Ask your employer for your total income in the calendar year. To convert it to US Dollars, you can use the average exchange rate for the year, which you can find at: www.irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates. In addition to salary, if you are reimbursed or receive an allowance for certain living expenses, you must include these amounts as income. Examples are cost of living allowances, overseas differential, housing reimbursement or allowance, education reimbursement for your children’s schooling, reimbursement of home leave expenses, payment of foreign tax on your behalf, etc. You also need to report as income the fair market value of housing, a car, meals or other benefits provided by your employer.
4. What is the foreign earned income exclusion?
You qualify for the foreign earned income exclusion (up to $108,700) if you are a U.S. citizen or resident alien (i.e. green card holder), you have a tax home in a foreign country, and you meet either the foreign residence test or the physical presence test.
It is important to keep track of the dates you are in the U.S. when you live overseas. These dates will help determine if you qualify for the foreign earned income exclusion, and they must be listed on IRS Form 2555 when you prepare your tax return. If you are travelling in the U.S. on business, you will be expected to report some amount of income as earned in the U.S. on that trip.
5. Can housing expenses be excluded or deducted?
You should calculate all your housing expenses, including amounts paid for rent, repairs, utilities, real and personal property insurance, furniture rental, residential parking fees, etc. These amounts will be used to calculate the foreign housing exclusion or deduction. Note that some expenses are not considered deductible housing expenses, such as mortgage interest payments, telephone charges, the cost of domestic help, purchased furniture, deductible taxes, or the cost of improvements to property. Generally, if your income is below the maximum exclusion for the year (currently $108,700), housing expenses are irrelevant because the housing exclusion or deduction will not benefit you.
The housing deduction is for people with self-employment income.
Note that mortgage interest and property taxes can be applied as itemized deductions.
6. What if I have not filed a U.S. tax return in many years?
If you have not filed a U.S. income tax return for one or more years you should try to get back on track. The IRS announced new streamlined filing compliance procedures. This program requires 3 years of late tax returns and 6 years of FBARs, along with a certification that failure to file was not due to wilful conduct.The program was updated in August 2021.
7. Will I be questioned at the border by U.S. immigrations authorities about U.S. taxes, or prevented from renewing my passport?
Taxpayers traveling to the U.S. with unpaid U.S. tax assessments can be detained at the border, questioned, and flagged for follow-up enforcement. The IRS is required to notify the State Department of taxpayers certified as owing a seriously delinquent tax debt. The State Department is generally prohibited from issuing or renewing a passport to a taxpayer with seriously delinquent tax debt. If you currently have a valid passport, the State Department may revoke your passport or limit your ability to travel outside the United States.
8. Can I deduct foreign taxes paid?
You generally can choose to claim income taxes paid to a foreign country as a credit against your U.S. income tax, or you can deduct them as an itemized deduction. If you elect to take the foreign earned income exclusion (discussed above), the credit is reduced.
9. Do I have to report foreign accounts?
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN)114, Report of Foreign Bank and Financial Accounts (FBAR).
The filing is required if the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported. The filing deadline is April 15th. However an automatic extension has been granted to October 15th for US citizens living abroad.
10. When is my tax return due?
For most people it is April 15th, but for U.S. citizens (or resident aliens) living abroad an automatic extension is given to June 15th. However, interest on any balance due to the IRS will be charged from April 15th.
11. Where do I file my U.S. Federal tax return?
If living abroad, you should e-file your return or mail it to:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
However, if you have a U.S. tax liability the payment and tax return should be sent to:
Internal Revenue Service Center
P.O. Box 1303
Charlotte, NC 28201-1303
12. What if I change my address?
If you change your mailing address you should notify the IRS using Form 8822.
13. How long does it take to receive a refund?
It generally takes about 6 weeks (3 weeks if you file electronically) to receive a refund.
Click here for Common Issues for Expats making American tax returns.
Click here for International issues for U.S. Citizens and green card holders filing U.S. tax returns.