Webinar: How to Avoid Being Double Taxed as an Expat. Recording and Q&A Transcript
On June 1, 2022, we hosted a webinar on how to avoid being double taxed as a U. S. expat which included live Q&A with our tax experts. You can access the recording and we’ve also transcribed this Q&A transcript.
We’ve grouped the questions by topic and we’ve also added links to relevant articles below.
Foreign Tax Credit: The Preferred Anti Double Taxation Tool for American Expats
Questions about Double Taxation
Q: I lived in Sweden and worked remotely online for my company in CA, USA. My company paid me on a CA W2. Sweden says since my “center of interest” was Sweden, I owe taxes there. Since I was paid on a California W2 both the US and W2 say “locally sourced income” is not considered FEI, therefore FTC and FEIC do not apply. Sweden says US must provide relief and US says Sweden must provide relief. So I have been double taxed!
A: US should provide relief on that. You can complete the questionnaire as well and we'll ensure the lowest US liability possible with avoidance of double taxation.
Q: How can you avoid capital gains when trading in crypto?
A: Amount of capital gain income is fixed. If the gains are taxed in a foreign country as well as the US, we can help you relieve double taxation in the US.
Q: What are the options for people who own a home outside the US for avoiding double taxation?
A: Congrats on being a home owner! Owning a home doesn’t preclude you from reducing double taxation, but property tax paid to other countries cannot be used to reduce tax paid to the US.
Q: I’ve read that if you owe tax as an expat, tax funds are due April 18 after which time the IRS starts charging interest. Is this true or is it June 15?
A: Taxes are due Apr 18 - but you can file up until June if you are residing abroad. Unless you owe a lot of money (ie 100k) - interest is tiny if you owed anything. The big issue is failure to file - that’s why you want to file an extension which we can do for you.
Q: Thank you. So just to be clear, even with the filing extension deadline, any tax owed is due April 18 then interest is charged?
A: Yep - that’s correct
Q: I live in a country that does not have a tax treaty with the US. I pay US federal taxes on income from self-employment. Can I make contributions to an IRA in the US, and if so, how much?
A: You can always make contributions. Whether that's beneficial to you or detrimental (excess tax) is something best answered during preparation because there are many catches to contributing to those plans. E.g., must have earned income or may not be beneficial. We can review and advise all possible options during preparation.
Q: How can I avoid double taxation if I sell a house in US?
A: Selling a home abroad or in the US is similar - there are specific exclusions available.
Q: I submitted 2019 taxes, got a letter that they needed more time, and heard nothing since. I’ve tried calling a bunch of times but can’t get through. Should I try filing again? I’m currently double taxed to the tune of 50k.
A: We have a service specifically to review your letter - please sign up and select IRS letter review.
Q: How can I avoid double taxation on passive income?
A: Thank you for your question. Double taxation on passive income is usually addressed through foreign tax credits and a tax treaty, if one has been signed between the US and the country you reside in. Our qualified tax experts can address this while we prepare your taxes and provide you with the best result in terms of tax savings.
Q: Is it either or: FTC or FEIE?
A: It is possible to claim both. Our qualified tax experts can figure out the best method for you while we prepare your taxes and provide you with the best result in terms of tax savings. Please sign up for our services at taxesforexpats.com.
Q: If you claimed FEIE before, can you claim FTC as well?
A: Yes, you can.
Q: Does the FEIE not apply if one earns more than $112K?
A: How much you earn does not matter - the FEIE and if you can use it depends on whether you meet the tests for it and whether or not it’s optimal for you. We’ll handle all of that for you during tax prep. This analysis and more are all included.
Q: How are US taxes affected if you have dual citizenship? (US and Germany)
A: You would be subject to US income taxes in the same manner as a US citizen without dual citizenship.
Q: I've just finished Streamlining Amnesty tax process for 2018 - 2020 using the Foreign Tax Credit type exclusion. Will I be able to swap to FEIE exclusion type for 2021 for the 1st 'normal' tax return, or does the 5-year wait to use this still apply?
A: When you complete your tax questionnaire, our team will be able to review and advise the best scenario for you - both for today and taking into account the future.
Q: I have not filed taxes in some years. Any problem reentering the USA to get documentation (e.g. problems at customs)?
A: Maybe! You should consider filing through the Streamlined Procedure. We just had a webinar on the Streamlined Procedure Program. You should watch it and see about getting caught up on past due returns.
Questions about retirement
Q: I am an American citizen living as a permanent resident here in Mexico. God-willing I plan to retire in about 22 months at age 70. Will my social security benefits be taxed either by the US or Mexico?
A: May need to report them or pay tax on them, or neither. It depends on your other income. Once you complete the questionnaire, we can advise.
Q: If I am successful with investments in the United States do I have to pay taxes on the earnings in the United States as well as Mexico? I have a lot of tax-loss carryforwards to take advantage of.
A: It depends - we’ll be sure to minimize any tax you have to pay to the US. Please sign up and complete your questionnaire, minimizing your tax is an essential part of the tax preparation process.
Q: I am a dual citizen (UK/US) - Does the IRS tax the 25% withdrawal that HMRC allows tax-free from pension funds after the age of 55?
A: Not normally, amount tax-free in UK is tax-free in US. Will need to complete the questionnaire and we can advise then.
Q: Thanks Reid - I was talking about taking a lump sum from my pension account. HMRC allows the first 25% to be tax free - will the IRS tax all of it?
A: Amount tax-free in UK is tax-free in US but should also refer to proper treaty articles so that IRS knows.
Q: That does not apply to an ISA, right?
A: We’ll handle everything for you during tax prep. If you wish for us to do a projection, we’re happy to assist, as well!
Q: I am trying to look and plan ahead for retirement. Is there anything to be done about non-pension retirement accounts, i.e. IRA accounts in the USA, 2nd and 3rd pillar accounts in Switzerland, and Riester-rente accounts in Germany?
A: Thank you for your question. Our qualified tax experts can help you plan for the future during a tax planning consultation.
Q: Is retirement income from a foreign retirement system taxed as earned income?
A: We’ll handle everything for you during tax prep. Enjoy your retirement :)
Q: Resident in UK but have no UK earned income in US 2021 tax year. I will have income from UK pension in the next year or 2. Is this considered Earned Income?
A: Not considered earned income in the US.
Q: What about US person who retires to NZ? I understand it is double tax on worldwide income.
A: We help avoid double taxation for you - that’s what we do (and we outline the methods in this webinar!)
Q: I am going to retire and will leave the USA likely move to Canada. I will purchase a residence there. My spouse and I have a retirement income of $150,000. If we keep our US citizenship we have to file. Our entire retirement income is from the USA. What country do we pay income tax to? Would we pay federal USA and provincial tax?
A: May pay taxes to both countries, but that's why there's relief from double taxation provisions — so that you're not double taxed. I suggest completing the questionnaire and we can advise on best mitigation tactics.
Q: I have double citizenship (Canada/France) working in US for the past 9 years with a Green Card. I have 401K retirement and pension plans in Canada and US. I will be retiring in France. I should return my Green Card. What would be the impact?
A: May require dual-status returns or not. But once you officially relinquish the green card, these are implications we deal with every day and can help you file those final US resident returns.
Questions from expats living in the UK
Q: Is USA tax levied on savings on UK USA or property (primary residence) that is tax-free in UK?
A: US requires you to report all income unless specifically excluded from income.
Q: Do you help on how to file UK tax return or just the US return?
A: We file US tax returns but work with firms locally in the UK who can assist with your UK filing.
Q: If I sell my primary residence in the UK to return to the USA, will I have to pay tax as if the sale is income - even if I reinvest the money in a house in the USA?
A: You will need to report the sale in the US one way or another, but there are many tactics to avoid tax on sale of primary residence.
Q: Does TFX do tax preparation for US and UK citizens? Or do you have an agreement with a company that can do a UK tax return using figures from the US return?
A: TFX prepares US tax returns but we have partners in local countries that can assist you locally (including the UK).
Q: Can Coverdell be used to pay for UK university loan for tuition?
A: Possibly, will need to determine qualifying status of the UK university. Complete the questionnaire and we can help.
Q: Is USA tax due on UK tax exempt individual savings account ISA?
A: We’ll handle everything for you during tax prep — you can see our help article on UK Specific for some information. Regarding ISA, here's a helpful article we wrote on it: Do U.K. ISAs and SIPPs count as foreign trusts on a U.S. tax return?
Q: Resident in UK but have no UK earned income in US 2021 tax year. Get taxed in UK on all US income even though some withholding was taken from US income. Any relief possible?
A: Thank you for your question. Our qualified tax experts can help you look for relief from double taxation through the US-UK tax treaty while we prepare your taxes and provide you with the best result in terms of tax savings.
Questions from expats living in Spain
Q: Do I need to report my LLC income from the US to my host country (Spain)?
A: We advise on US taxes. Will need to speak to someone in Spain. The LLC income is reportable in the US.
Q: Does US have a Tax treaty with Spain to avoid double taxation?
A: Yep, there’s a tax treaty.
Q: I am not sure where to start. I receive only IRA distributions and SSA benefits. Where do I start to get assistance? I live in Spain.
A: First step: complete our tax questionnaire and someone can help you!
Q: I am paying into US social security but wonder if that is the right way to go. I live in Spain and have been here almost four years. I expect to work another 5-6 years, all as a Spanish resident. How do I decide which country to pay into?
A: Thank you for your question. We would need more information on your situation and how it applies to the US-Spain totalization agreement.
Q: I am self-employed and will be earning money through my US/NYS based LLC while going to Spain on a study visa. I will work remotely, part-time while in Spain. I know I need to file a tax return in the US. Will I also need to pay taxes in Spain? I read that if I’m there longer than 183 days, I will need to…
A: TFX handles US tax returns - whether or not you have Spanish requirements would be determined by a local tax expert. After filing with us, please reach out to our support who can put you in touch with local Spanish partners.
Q: If I’m going to Spain on a study visa for over 183 days, will I be taxed?
A: Studying doesn’t mean you earn income :) If you have no income - you don’t need to file. We’ll be able to analyze your specific scenario and determine if you need to file, and how best to do so. If you are planning on doing it - you can avail of a consultation call so our experts can answer your questions.
Q: I am a US Resident (Green Card) living in Spain. I will return to the US on July 4th to live there. According to the Spanish legislation, because I will have lived in Spain for 183 days (plus I am citizen and owe property), I will be considered a Spanish resident for fiscal reasons and will have to file taxes in Spain. However, because of my Green Card, the US will also force me to file taxes as a resident in the US because of my Green Card. How could I solve this problem? I cannot file taxes as resident in two countries, but in only one. Yet, both countries will consider me as a resident.
A: Many different definitions of residency. Greencard holders will file Form 1040 regardless of their determined residency abroad.
Q: Thank you, additional question, we already filed taxes for this year, but do you also review the filed taxes for any possible mistakes?
A: Yes, we can review your return.
Q: How can I see my IRS account online? I've really struggled with this.
A: They make it hard sometimes. You can access transcripts, but sometimes they require a US address. We can obtain access to your account under-representation services.
Q: How do I get paired up for an interview and guided experience (e.g. working with a person)? I tried once before but was asked to fill in automated templates and I didn't have access to the information/knowledge required to fill in those templates and had to stop. I'd really like to work with a person/need some guidance/help to get started.
A: Thank you for your question. Our support team can guide you with filling out the tax questionnaire. If further assistance is needed, we provide a VIP service where our tax experts can help you complete the questionnaire.
Q: Do you only do the prep of the tax forms, or do you also do additional forms and services if needed for audits?
A: Thank you for your question. We do indeed have representation services.
Q: Is there a fee for an introductory consultation with you/TFX? If so, how much?
A: The intro consult is free with a $50 retainer.
Q: Does your company guarantee your advice?
A: If you ever receive an IRS letter from a return we prepare, we review it and provide feedback. If we ever make an error, we of course fix it.
Q: Do you file Fin 114 and 8393 forms for foreign bank accounts?
A: Yes, we prepare those every day!
Q: Where is the questionnaire?
A: Sign up on our website and fill out the questionnaire.
Q: Do you work with Expat living in Israel?
A: Yes, of course! We have many Expat clients who are based in Israel.
Q: Can your company assist with presence test exceptions e.g. closeness to another country?
A: We assist with anything related to US tax prep.
Q: I need assistance; how can I make an appointment with one of your advisors?
A: We offer consultations. Rebecca is one of the best!
Q: Do you have expertise and experience in Netherlands taxation?
A: Thank you for your question. Our clients include many expats from the Netherlands.
Q: I am wanting to get my "ducks in a row" before I embark on tax residency in USA. Is this something that I can buy advice from you in advance of signing up to a package for submission to IRS?
A: Yes, we provide tax consultations! Rebecca does these and can answer any questions you have.
Q: Can you confirm, that my children would ever have to file US taxes if they never applied for a passport or SSN?
A: Yes, US citizens are subject to US taxes. Our qualified tax experts would be happy to address your concerns. Sign up for our services at taxesforexpats.com.
Q: Young adult American expat children - students with negligible income 18-21 years old - do they still need to file and if so is there an easy way for them?
A: We handle everything - so we can help determine if they need to file. Please sign them up for an account.
Q: I have adult children over 18 that live at home with me. Is the FEIE still generally more useful for me?
A: Thank you for your question. There are a few factors that would need to be considered in order to answer you question. Our qualified tax experts can address this while we prepare your taxes and provide you with the best result in terms of tax savings.
Q: Does the expat taxes scheme work as well if I'm a dual citizen (American and Italian)?
A: Yep - of course. And there are specifics related to being a citizen of Italy, as well (especially if you are self-employed). Either way - we can assist you.
Q: Is the income include 401 k that is not being accessed?
A: Thank you for your question. Part or all of a distribution from a 401k plan can be considered income. Our qualified tax experts can address this while we prepare your taxes and provide you with the best result in terms of tax savings.
Q: Where can we find a list of countries with tax treaties? Are the tax treaty documents available to the public?
A: Yes, here’s the list of countries with tax treaties.
Q: Is FEIE applicable only for income tax? How does it apply relative to SS / Self Employment / Medicare / FICA type taxes?
A: It's for income tax. But, there are other options for minimizing SECA-type taxes for residents of certain foreign countries. We will ensure to avail of all possible mitigation tactics when we prepare the return. The first step is completing the tax questionnaire.
Q: Can income tax paid on rental income in Ireland be deducted against US tax on that Irish rental income?
A: Each type of income is different and depends on the treaty. We’ll handle all of that for you during tax prep to ensure you pay the minimum tax possible (and get a refund if you overpaid).
Q: I am a permanent tax resident of France (I have lived here since 1998) and have no intention of returning to the USA to live however I would like to spend more than 35 days per year visiting family. How many days are allowed for visiting the USA per year?
A: If you are considered a bonafide resident (likely, since you do not intend to return to the US) then the 35-day per year limit would not apply to you. However, long-term visits may jeopardize your BFR status. Our tax experts can advise you on the specifics.
Q: Is that correct - you must be out of the country for 330 days? What if I’m on holiday in the USA and not working.
A: Yes, for Physical Presence Test, outside US for 330 days in a one-year period. When you complete the questionnaire, it will ask about travel to the US and we can figure if you qualify under the PPT (and determine most advantageous period) or if BFR is possible.
Q: Is there any additional tax reduction when one qualifies for bonafide resident status? Or is it just an increased number of days that you can come to the USA?
A: Maximum FEIE is around 108000 in 2021. BFR and PPT have different implications, sometimes PPT is reduced based on days. You can still claim FTC on top of the FEIE. We’ll handle everything for you to ensure your return is optimized given your personal situation.
Q: How does it work if I want to pay into an IRA account in the US but I get paid in Switzerland in CHF? Do I submit the total contribution to you and I get tax relief on the US tax?
A: Yes, you complete the questionnaire, how much was contributed (this would be contributed in USD), and we can take it from there. Many different implications with IRA accounts that generally require apprising the taxpayer's situation and preparing the return.
Q: Can I contribute to mutual funds or buy stocks living overseas in Costa Rica?
A: Yes, but there may be additional filing requirements if purchasing foreign mutual funds. Our qualified tax experts will be able to provide you with an answer to your question during an introductory phone consultation.
Q: The Federated States of Micronesia is in the Compact of Free Association agreement. The zip code is a US zip code. It’s unclear if FSM is taxed like the US or not?
A: As a US person you are required to file in the US. You could live anywhere but you'll still complete the Form 1040.
Q: My employer grants me yearly restricted stock units (RSU). The stock value is not considered taxable income in my home country and is not taxed until sale of the stocks. However, the US considers this as income which causes a large amount of income for which I don't have tax credits for. How can this be solved?
A: We’ll handle all of this for you during tax prep. Make sure you mention the RSU in the tax questionnaire so that our team sees all the details.
Q: Are stock that are gifted done on a stepped-up basis. If I google this I get both a yes and no answer. What is the current answer? If I gift stock to my daughter and she sells it immediately does she pay capital gains if the value of the stock is the same as at the time I gifted it?
A: Basis of gift can be different values depending on comparison of FMV with basis. Need all the details and we can tell you the basis. But, likely she does pay tax, otherwise that would be quite a loophole if no one paid tax on sufficiently appreciated gifts.
Q: Can you post a list for the 29 countries that offer SS credit transfers between the US?
A: You can find a link to the SSA agreements from our article.
Q: How are taxes affected if you work for a US Subsidiary in Canada?
A: Complete the questionnaire and we can help! But shouldn't be too different.
Q: I reside in Belgium but own a house in Virginia that is rented. I pay property taxes and I report the rental earnings on my federal returns. Is it necessary to also report Virginia taxes?
A: We’ll determine your exact filing requirements when we review your information.
Q: For entrepreneurs who founded a company and have shareholdings as a result in a foreign registered company - in general what are the complications associated with that?
A: It depends on a multitude of factors - it can be from fairly vanilla to extremely complex. Once you complete your tax questionnaire we’ll be able to review and give exact advice.
Q: Is 108700 exclusion for persons or couples as well?
A: Thank you for your question. The FEIE is per person and each person must qualify to use the exclusion. Our qualified tax experts can address this while we prepare your taxes and provide you with the best result in terms of tax savings. Please sign up for our services at taxesforexpats.com.