In today’s global economy more people are living and doing business overseas, however, that doesn’t stop the taxing power of the United States on its citizens and/or residents. U.S. citizens and/or U.S. residents are taxed on their worldwide income. U.S. residents are individuals that either (a) maintain a Green Card or (b) meet the substantial presence test. Contrary to what many people may believe, if you’re a U.S. citizen and/or U.S. resident, you must remain in compliance with your tax records if living overseas. The filing obligations will not cease and the last thing people need is an unfriendly notice. However, the U.S. does have tax treaties with foreign governments and the IRS offers some tax relief options for individuals residing overseas by making available
(1) foreign tax credits paid to foreign governments on foreign earnings,
and (2) the foreign earned income exclusion.
The exclusion is adjusted annually, and for calendar year 2013 each spouse can exclude up to $97,600 of earned wages. U.S. citizens/residents that marry nonresident aliens, and reside outside the United States, could be faced with difficult tax scenarios and should consult a Wise CPA Group tax advisor when it comes time for filing. U.S. residents residing abroad can benefit from U.S. tax treaties with the foreign country, and should explore these options come time for filing. U.S. citizens/residents that earn income through self-employment sources, and reside outside the United States, could be faced with additional tax burdens and should consult a Wise CPA Group tax advisor when it comes time for filing.
Nonresident aliens/Foreign entities, doing business in the U.S. from abroad, are taxed on their effectively connected U.S. source income, and should consult a Wise CPA Group tax advisor regarding if special treatment is made available through tax treaties.
Additional disclosures might be required of U.S. persons if any of the following conditions are present:
• Ownership in a Foreign Corporation incorporated outside the United States
• Transfer Pricing between domestic and/or foreign entities
• Contributing property to a Foreign Corporation incorporated outside the United States
• Ownership in a Foreign Partnership organized outside the United States
• Ownership of a Foreign Disregarded Entity organized outside the United States
• Ownership in a Foreign Grantor Trust incorporated outside the United States
• Ownership of a Foreign Bank Account Held outside the United States
• Ownership in Foreign Mutual Funds held outside through a foreign bank outside the United States
• Ownership in Foreign Pension Funds
• Ownership in Foreign Capital Assets held outside through a foreign bank outside the United States
• Ownership in Foreign Mortgages held outside through a foreign bank outside the United States