Expat Taxes

Thrifty Travel Mama - Expat Life - TaxesI recently had a friend ask me about my taxes.  Not as in, “Are you done with them yet, slacker?”  She’s a nice friend.  It was more like, “How different is it for you since you don’t live in the US?”

Well, truth be told, I am a slacker.  I hem and I haw and I drag my feet all through January and February, and even the beginning of March.  I hate doing my taxes.  I know, I know, I’m not the only one.

Might I suggest to you, though, that expats (expatriates, Americans living abroad) dread taxes even more than the average American?

As an American living in Germany, I can attest that doing US taxes is the pits.

We don’t get W2’s.  We get paid in foreign currency.  We have to translate our year-end income statement from another language.  We have to get all our tax forms from any US financial interests electronically or find a buddy to open our mail, scan, and email the documents to us.  And we have lots and LOTS of rules with confusing definitions.

As you can imagine, most people just pay a professional.

I am not most people.

I have an absolutely irritating DIY work ethic.  I’m also thrifty as all get out.  If I can do my own taxes for free, why would I pay someone upwards of $300 to do it for me?

And, if I don’t do my taxes myself to understand the system, how will I ever know if $300 is a bargain or a rip-off?

Since I’m NOT a CPA or a lawyer, and I do not have any tax advice for you, I’ve decided to offer you an absolutely thrilling array of random facts regarding my expat tax experience.   Just what you’ve always wanted.

  • Expats get an automatic two-month extension on their tax due date.  The only catch is that you must attach a statement explaining why you qualify for the automatic extension.  I’m an expat.  I’m special.  The end.
  • Expats can deduct up to $92,900 (2011) of foreign-earned income as long as they meet certain requirements.  This made my tax bill for 2011 a nice fat even zero.  Since we pay German taxes, it would really be a joy-killer to give Uncle Sam a helping, too.  Now you know how much we do not make.  
  • Expats must have been out of the US for 330 days in a 365 day period in order to qualify for the income deduction mentioned above.  It’s also possible to qualify by living and working outside of the US for an entire January-December tax year as long as trips were infrequent and not business-related.  As always, such requirements are never simple and many restrictions apply.
  • Even expats can e-file their taxes.  Though not all programs support this feature, it is possible.  I use TaxAct (and I don’t make any money if you click on that link).  Bonus: TaxAct has a free e-file version regardless of income.
  • Expats must notify the US Department of the Treasury of any foreign bank account that reaches 10,000 USD at any point during the year.  Though this isn’t filed with your taxes and doesn’t go to the IRS, it’s part of the process and must be reported yearly.  Expats failing to fill out this form while having a fat overseas bank account can be fined $100,000 or more.
Itching to know more?  Check out the IRS Tax Guide for US Citizens and Resident Aliens Abroad.  I highly recommend indulging right before bedtime if you’re having trouble sleeping.

So, Happy Tax Day to you, dear reader.  If you are one of the lucky Turbo-Tax-and-go Americans, celebrate!  Other Americans actually envy you.

If you have ever filed taxes as an American living abroad, leave a comment to let us know your experience.Signature-Marigold

5 thoughts on “Expat Taxes

  1. Thank you for this post! I completely forgot about tax day, but luckily I don’t owe a thing but I’ll still get that form in by June. And that $10,000 in one bank account thing is totally new for me! I have an account that’s approaching that amount so thank goodness I read this post. Even if I’m not taxed on it, I’d rather not deal with it.

  2. Pingback: Marvel: The German Tax Frenzy | Thrifty Travel Mama

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