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Income Exclusion for Expatriates

April 15, 2015

Kathleen M. Egan CPA offers a wide array of financial solutions for residents of the phoenix metropolitan area. Kathleen M. Egan CPA offers income exclusion services for expatriates reporting foreign incomes. Many are not aware that an American living abroad can exclude up to $95,000 dollars on income taxes for that year. Moreover, married couples can exclude an additional $95,000 on IRS tax returns, resulting in a potential collective savings of $190,000 dollars.

All U.S. Citizens submitting a foreign tax return to the IRS are entitled to an automatic 2-month extension, and an additional extension is available by filing form 4858, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return. Be aware though that an additional extension will require the expatriate to pay interest during this additional period. However, this is just the tip of the iceberg for expatriates filing income tax returns to the IRS. It’s in the expatriate’s best interest to consult a CPA like Kathleen M. Egan to navigate through the complex environment of foreign tax code.

The subtly of foreign tax code stems from the fact that the U.S. has tax treaties with over sixty countries. Each one of these treaties is unique, complex, and esoteric. There function is to protect expatriates from the burden of paying taxes to two countries. After all history has shown that fighting a battle on two fronts is a fast track to defeat.

Another interesting fact about foreign tax code, which sheds light on the subtly and complexity of foreign tax code is the time table. The IRS is granted three years to investigate foreign tax code, after this time, the statute of limitations runs its course and the expatriate is free from intervention from the IRS. Again, these elements of tax code for American expatriates are just the tip of the ice berg. It would be far from unwise to consult a CPA like Kathleen M. Egan when navigating through this intricate terrain.


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