Why Filing Taxes When Living Abroad is Harder

Living and working abroad comes with its challenges, especially at tax time. Americans are the only ones taxed on worldwide earnings. There are more forms to be filled out by those working and living abroad than those residing and working within the United States. Filing taxes abroad has become more difficult ever since Swiss banks have admitted to helping Americans hide assets offshore. The best way to minimize the headache which comes with filing taxes from abroad is to prepare adequately and perform copious research well before the deadline.

Foreign Earnings Reports

In addition to the stack of papers that must be filed for a traditional U.S. tax return, those working and living abroad must also fill out two additional forms. The foreign earnings report papers include wages, stocks, withholdings, investments and donations. The forms are difficult to understand and take a good amount of time to complete.

Frequently Changing Rules

It is difficult to keep up with the ever-changing rules of filing taxes when living and working abroad. The laws change frequently, so what was true last tax season may not necessarily be true during the next season. It is important to work with an internationally experienced tax preparer for this reason. Prior to completing a foreign tax return, ensure that you have read the latest publication of tax guidelines to avoid penalties and fines.

Bottom Line

Foreign assets must be disclosed even for those that have not lived in the U.S. for decades, including those that have never lived in the U.S. but were born to American parents. Fines up to $10,000 per year may be attached to a tax return for undisclosed foreign accounts. Americans living and working in foreign countries must report their earnings, regardless of what country the income was generated in.

Image credit: Mark Doliner