U.S. Expatriate
Tax Services
The
U.S. has one of the most complex taxing systems in the world and American’s
working or relocating outside the U.S. face an extremely complex tax situation. Knowledge
of these tax laws can save you thousands of hard earned tax dollars.
Residents of the U.S. working abroad for a limited duration often are entitled
to deduct travel and temporary living expenses while on overseas assignment.
Those who extend their stay in a foreign country or countries often are entitled
to exclude a significant portion of income earned abroad from their U.S. taxable
income, but only if they have met strict qualifying tests. Some may deduct
moving expenses to their new location and others may even deduct a portion of
the cost of securing housing while living overseas in addition to excluding a
portion of income earned abroad.
Most countries impose an income tax on income
derived from sources within that country similar to the way the U.S. imposes a
tax on income from U.S. sources and many countries have tax conventions with the
United States (i.e. Tax Treaties) to avoid double taxation of the same income.
Additionally the tax statutes of the U.S. and many other countries provide for
further tax relief in the form of a credit against tax imposed by the country of
residence for taxes paid to foreign taxing jurisdictions. The U.S. foreign tax
credit system is extremely complex and provides for different credits against
different types of income.
It is possible to claim the benefits of tax statutes
that allow the exclusion of certain foreign source income as well as certain
deductions; however a foreign tax credit may only be claimed against U.S.
taxable income that is subject to tax by a foreign jurisdiction and may not be
claimed against income that is excluded from tax in the U.S. Excess allowable
foreign tax credits may be carried to other tax years and applied against
foreign source taxable income.
Planning
is paramount for U.S. taxpayers working in foreign countries. Careful attention
to tax rules regarding the number of days needed to be spent outside the U.S. in
order to qualify for foreign earned income exclusion and taxpayers must
determine whether it is beneficial or not to claim certain tax benefits
depending on what they expect their future tax situation to be like. What
decisions are made on one year may affect several years in the future. For
example, should a U.S. taxpayer elect to forego the benefits of the earned
income exclusion under the Bona Fide Residence test in order to possible take
greater advantage of excess foreign tax credits, the election is binding for
five years.
Choosing
Powers & Company will ensure that your return is accurately prepared and that
you pay only the tax that you are legally obligated to pay. We have been
providing quality tax solutions at reasonable rates for over 30 years.
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