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Have You Left the U.S.? Beware of Some of the Common Mistakes Made by Ex-Pats

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Posted in on July 29, 2016

When a United States citizen leaves the country and becomes an ex-pat, there is a common misconception that they no longer have to file annual U.S. tax returns or need to comply with IRS obligations. While this may be the case for some countries, it is not the case in the United States. As long as you remain a U.S. citizen, you will still have tax obligations no matter where you live or how long you may have spent living outside of the United States.

Tax compliance mistakes made by ex-pats can be very costly, so it is important for anyone connected with the U.S. to speak with Maryland international tax attorneys about what their obligations are. Ex-pats should also be aware of some of the most common mistakes which are made by people living abroad and which end up getting people into tax trouble.

Common Tax Mistakes Made by Ex-Pats

Some of the most common errors made by ex-pats when it comes to complying with their tax obligations include:

  • Assuming that filing taxes where they live is sufficient. Expats not only have to file tax returns in the place where they actually live and work, but they also have to file U.S. tax returns with the IRS annually. The United States is just one of two countries mandating expats submit tax returns even when living overseas. The other country requiring this is Eritrea.
  • Failing to file returns because they don't owe taxes. The United States requires you to file a nil return if you have no tax to pay, even if you are living abroad. If you don't file a nil return showing you owe nothing, the IRS will not know whether you owe anything or not. They'll fine you for not telling them that you don't owe anything.
  • Failing to file FBARs. All U.S. connected persons with offshore accounts that have a value of $10,000 or more at any point over the year must file a Report of Foreign Bank and Financial Accounts (FBAR).  FBARS have to be filed annually so the U.S. taxing authorities can cross reference them against reports that foreign financial institutions are required to make.  The FBAR requirements kick in based on aggregate balances across all accounts, so you still have to file even if you do not have a single individual account with $10,000 or more in it.
  • Assuming tax-deferred pensions and savings contributions are not taxable. The IRS may not recognize the deferral and U.S. connected persons may be required to pay taxes when employers contribute to pension or savings accounts, unless you have paid taxes abroad on those accounts and have offsetting credits.

You don't want to make mistakes that could end up getting you in trouble with U.S. taxing authorities, especially if you live abroad and may have a hard time clearing up problems with the IRS. To make sure you avoid errors and comply with all of your tax duties, contact attorney Kevin Thorn for help as soon as possible.


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