What Are Expat Tax Services?

Expat tax services involve providing assistance to U.S. citizens and green card holders living outside the United States who, despite residing in a foreign country, still need to file U.S. tax returns. Importantly, U.S. citizens must report worldwide income to the IRS and comply with U.S. tax obligations, including filing forms and claiming credits like the Foreign Earned Income Exclusion and Foreign Tax Credit.

Simple Steps for Filing Expat Taxes

Determine Your Filing Requirement: To begin, verify if your worldwide income exceeds the IRS filing threshold.
Gather Documents: Next, collect income documents from abroad, such as pay slips and bank statements.
Choose Tax Benefits: Afterward, decide between the Foreign Earned Income Exclusion (Form 2555) or the Foreign Tax Credit (Form 1116).
File FBAR if Applicable: Then, if foreign accounts exceed $10,000, you must file the FBAR (FinCEN Form 114).
Submit Your Tax Return: Finally, complete Form 1040 and submit it by the June 15th deadline for expats.

Expat Tax Services

Foreign Earned Income Exclusion vs. Foreign Tax Credit

Feature	FEIE	FTC
Eligibility Requirements	Must meet physical presence or residency test	Must have paid foreign taxes
Form Used	Form 2555	1116 Form
Maximum Exclusion/Credit	Up to $126,500 (in 2024)	Credit for foreign taxes paid
Purpose	Exclude foreign earned income	Reduce double taxation

Common Expat Tax Deadlines

June 15th: Automatic extension for expats to file Form 1040.

October 15th: Additional extension available through Form 4868.

April 15th: Deadline for FBAR (FinCEN Form 114), extendable to October 15th.

Qualification for the Foreign Earned Income Exclusion (FEIE)

To qualify for the Foreign Earned Income Exclusion, expats must meet either the Bona Fide Residence or Physical Presence test, proving substantial time spent abroad.

Bona Fide Residence Test: Must be a bona fide resident of a foreign country for a full tax year.
Physical Presence Test: Spend at least 330 days in a foreign country within a 12-month period.

Differences Between FEIE and FTC for Expats

The Foreign Earned Income Exclusion (FEIE) excludes foreign income, while the Foreign Tax Credit (FTC) reduces U.S. taxes based on foreign taxes paid. Therefore, consulting an advisor can help determine the best option.

FEIE: Excludes foreign-earned income from U.S. tax.
FTC: Reduces U.S. taxes by the amount of foreign taxes paid.
Which to Choose: An expat tax advisor can help determine which option provides the greatest tax savings based on individual circumstances.

Do Expats Pay State Taxes?

Expats may owe state taxes if they retain residency in certain states. In order to avoid state taxes, expats should establish foreign residency and update their residency status.

Varies by State: Some states require tax filing if residency is maintained.
How to Avoid State Taxes: Establish foreign residency and consider steps to change your state residency status.

Our Services

Preparation of U.S. Tax Returns for Expats: We provide tailored support for Form 1040, Form 2555, and other relevant schedules.
Foreign Tax Credit Optimization: Furthermore, we assist with Form 1116 to claim credit for foreign taxes paid.
FBAR and FATCA Compliance: We also help with filing FinCEN Form 114 (FBAR) and Form 8938 to report foreign assets.
Foreign Housing Exclusion and Deduction Assistance: In addition, we help claim qualified housing expense deductions.
Tax Treaty Guidance: We provide advice on utilizing treaty provisions to reduce double taxation.
Streamlined Filing Compliance Procedures: Our services include assistance with catching up on past filing obligations without penalties.
Advisory Services: Lastly, we offer personalized guidance for tax planning and reducing U.S. tax liability.

Conclusion

Dimov CPA provides specialized expat tax services, including tax return preparation, foreign tax credit optimization, and FBAR compliance. We ensure that expats stay compliant with U.S. tax laws while minimizing their tax liability. Contact Dimov CPA today for expert assistance with your expat tax needs.