Tax Tip 2023-36: Reporting foreign income and filing a tax return when living abroad
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Issue Number: Tax Tip 2023-36
Reporting foreign income and filing a tax return when living abroad
U.S. citizen and resident aliens living abroad should know their tax obligations. Their worldwide income — including wages, unearned income and tips — is subject to U.S. income tax, regardless of where they live or where they earn their income. They also have the same income tax filing requirements as U.S. citizens or resident aliens living in the United States.
An income tax filing requirement applies even if a taxpayer qualifies for tax benefits such as the Foreign Earned Income Exclusion or the Foreign Tax Credit, which reduce or eliminate U.S. tax liability. These tax benefits are available only if an eligible taxpayer files a U.S. income tax return.
Taxpayers living outside of the U.S. and Puerto Rico have an automatic extension to file – but not to pay
Those serving in the military outside the U.S. and Puerto Rico on the regular due date of their tax return also qualify for the extension to June 15, 2023. Taxpayers should attach a statement to their tax return if one of these two situations applies. More information is in the instructions for Form 1040 and Form 1040-SR, Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad and Publication 519, U.S. Tax Guide for Aliens.
Reporting requirement for foreign accounts and assets
People must also report foreign assets of $10,000 or more to the Treasury Department
The form is available only through the BSA E-filing System website.
The deadline for filing the annual Report of Foreign Bank and Financial Accounts (FBAR) is April 18, 2023. U.S. persons who miss the April deadline have an automatic extension until Oct. 16, 2023 (as October 15 is a Sunday), to file the FBAR. FinCEN’s website has the details.
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