As an American Expat living and working overseas, you may live in one of the 15 tax free countries in which you are not liable for municipal or federal taxes. These countries are :
British Virgin Islands
Turks and Caicos
Even if the country you reside and work in does not levy personal income tax, you are still required to file a US expat tax return every year and report your worldwide income to the IRS if you retain US Citizenship or a US Green Card.
Since taxes aren’t a concern in your host country, you may receive fewer documents. As such, you will have to be sure to maintain clean records and be prepared to gather most (if not all) of the documentation you need to file your US expat tax return.
Listed below are some of the top items reported on Form 1040 and other important tax forms and the type of records you should keep safe and secure in order to file an accurate return.
Salaries and Wages
Paycheck stubs or wage reports
List of non-cash perks and benefits provided by employer (housing, company car, compensation of moving expenses)
W-2 Forms (if earning income from an American Employer)
Detailed spreadsheet of gross income
Detailed spreadsheet of all business expenses
Income from Real Estate Sales
Commission check stubs
Schedule of rental-related expenses
Income from Stock or Securities
Annual broker statements if available or
Online account statements
Income from Dividends and Interest
1099 Forms - if income received from the U.S.
Annual account statements for income from foreign accounts
If you have any other types of income not mentioned on this checklist, make sure to keep all of that information as well so it can be properly calculated on Form 1040.
Form 1098 for U.S. lender
Annual statement from mortgage lender
There is a wide variety of deductions available to you to help minimized your US tax liability. In order to accurately claim these deductions, it will be necessary for you to keep receipts, bills, and other documentation that will help you itemize your deductions to reduce your tax bill.
You will only be required to report actual amounts on your US expat tax return. Unless otherwise instructed, the IRS is not interested in reviewing your supporting documentation when you file your return. You may need to furnish them in the event of an IRS audit, however. You want to keep these records to make it as easy as possible for you or your paid preparer to file your US income tax return accurately and in case you’re audited in the next couple years.
Do not include deductions unrelated to survival needs such as expenses for housekeeping, internet and telephone charges (unless business related), gardening, commuting.
Additional Filing Considerations for American Expats
As a US Expat, you may be required to report certain activity such as owning foreign bank accounts, earning US-sourced income, or having spent enough time in a foreign country (or the United States) to have qualified for different tax treatment.
If you spent time in other countries besides your host country and the United States, you will need to report:
- The country to which you travelled,
- The date of arrival, and
- The date of departure.
If you travelled to the United States, you will need to include the previous details in addition to:
- The exact number of business days you spent in the US, and
- The exact amount of gross income earned in the US.
Foreign Bank Accounts
Owning one or more foreign bank accounts with an aggregate total of $10K or more requires you to file Form TD F 90-22.1 with the Department of Treasury. Information you will need includes:
- Name and physical address of each foreign bank,
- Each foreign account number,
- All names listed on each foreign account, and
- The highest balance of each foreign account reached during the taxable year.
If you have FBAR filing requirements, you should provide documents that include the following information for each account:
- Bank name and address
- Account number
- Names on the account
- The highest balance in each of your foreign accounts during the year.