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Question for the Money Doctors

Question submitted on Jan 25, 2013.

Question

Hi there

I live in sydney and been here for last three and half years. I did not know I had to file taxes in US even though I live and work here and pay taxes in Australia.

If I file this year what forms do I have to do? Both fed and state? I am confused so any help would be appreciated.

Thanks
Sim

Answer

Hi Sim,

US citizens are taxed on their worldwide income (including retirement income), regardless of where they live or earn their income. Presuming that you are a US citizen, you should file a US income tax return for all of the open prior years as well. If you have no family or residence in the States, you will not likely have a state filing requirement, but you should inquire as the rules vary from State to State.

Included in the income tax filing requirement is Form 8938, Statement of Specified Foreign (non-US) Financial Assets. In addition to the income tax, US citizens may be required to file Form TD 90-22.1 if they own a foreign account worth over $10,000 during the tax year.

IRS Publication 54 is always a good reference tool for US citizens working abroad. The publication discusses special tax rules for U.S. citizens who work abroad or who have income earned in foreign countries.

IRS Publication 54 discusses several tax provisions applicable to US citizens working abroad, such as:

  • Foreign earned income exclusion
  • Foreign housing exclusion and deduction
  • Foreign moving expenses
  • Foreign tax credit
  • Tax treaty benefits

That being said, please note that the income tax rules applicable to expatriates are very complex and that you would be well served by contacting a CPA/PFS who will be able to help you analyze the tax rules and whether or not you are eligible for treaty benefits. Visit www.findacpapfs.org to find a CPA/PFS near you.


For additional information visit http://www.360financialliteracy.org/