Many Americans living abroad are aware that they will have little or no income tax liability, but a large number are unaware that they are still legally required to file their annual tax returns even if no money is owed.
According to the IRS, “the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad.” (see U.S. Citizens and Resident Aliens Abroad.) This means that all Americans and resident aliens are required to file income tax returns each year, regardless of the income source. Whether any taxes are actually owed, however, depends on the source(s) of income, amount of income, and length of time living or residing abroad during the tax year.
If you meet certain requirements, you may qualify to exclude foreign earnings up to $97,600 in TY 2013 and/or claim the foreign housing deduction. Excludable earnings are adjusted annually for inflation, so you will have to remember to check the IRS website or consult with your tax attorney as you prepare to file each year.
The bad news: if you live abroad, but earn income from a U.S. source, you will not qualify for the foreign earnings exclusion. If you fall into this category, however, you probably are already aware of this and have been filing your returns regularly.
The good news: “If you are a U.S. citizen or resident alien residing overseas, or are in the military on duty outside the U.S., on the regular due date of your return, you are allowed an automatic 2-month extension to file your return and pay any amount due without requesting an extension. For a calendar year return, the automatic 2-month extension is to June 15.” (see U.S. Citizens and Resident Aliens Abroad.)
Depending on your personal situation, filing from abroad could be relatively straightforward or very complex, and you may wish to consult with a tax professional.
Below are more resources that the IRS has made available to Americans living and working abroad: