Frequently Asked Questions (FAQs) About International Individual Tax Matters
1. I’m a U.S. citizen living and working outside of the United States for many years. Do I still need to file a U.S. tax return?
Yes, if you are a U.S. citizen or a resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. However, you may qualify for certain foreign earned income exclusions and/or foreign income tax credits.
2. I pay income tax in a foreign country. Do I still have to file a U.S. income tax return even though I do not live in the United States?
You have to file a U.S. income tax return while working and living abroad unless you abandon your green card holder status by filing Form I-407, with the U.S. Citizen & Immigration Service, or you renounce your U.S. citizenship under certain circumstances described in the expatriation tax provisions.
3. What is the due date of a U.S. income tax return?
The due date for filing a federal individual income tax return generally is April 15 of each year if your tax year ends December 31st. Your return is considered filed timely if the envelope is properly addressed and postmarked no later than April 15. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day. If you cannot file by the due date of your return, you can request an extension of time to file
However, if you are a U.S. citizen or resident alien, who is either: (1) living outside of the United States and Puerto Rico and your main place of business or post of duty is outside of the United States and Puerto Rico; or (2) in military or naval services on duty outside of the United States and Puerto Rico on the due date of your return, you are allowed an automatic 2-month extension until June 15 to file your return and pay any tax due. If you use this automatic 2-month extension, you must attach a statement to your return explaining which of the two situations qualify you for the extension.
4. I just realized that I must file U.S. income tax returns for prior years. How many years back do I have to file?
You must file a federal income tax return for any tax year in which your gross income is equal to or greater than the personal exemption amount and standard deduction combined (per the Form 1040 Instructions for the corresponding tax year). Generally, you need to file returns going back six years. This will depend on the facts and circumstances of your particular situation. .
5. What is the status of my refund?
You can check the status of any refund you expect as soon as 24 hours after you e-file a return or 4 weeks after you file a paper return. There are several ways to check the status of a refund.
6. I have completed my tax return and I have a balance due. How do I pay the tax liability?
There are various options for paying your U.S. taxes.
- EFTPS (Electronic Federal Tax Payment System).
This is only available if you have a U.S. bank account.
- Federal Tax Application (same-day wire transfer).
If you do not have a U.S. bank account, ask if your financial institution has a U.S. affiliate that can help you make same-day wire transfers. For more information, visit www.eftps.gov.
- Check or money order.
To pay by check or money order, make your check or money order payable to the “United States Treasury” for the full amount due. Do not send cash. Do not attach the payment to your return.
- Credit or debit card.
This option is useful if you do not have a U.S. bank account. Refer to the Pay Your Taxes by Debit or Credit Card website with details regarding this process and fees.
Reporting of Foreign Financial Accounts
1. I was reading the 1040 booklet in the section that covers Schedule B and I saw something that talks about reporting my Foreign Bank Accounts to the IRS. Is that something that affects me and is there something that I should do?
If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the U.S. Internal Revenue Service (IRS) by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
In addition, U.S. citizens and residents with specified foreign financial assets with an aggregate value exceeding $50,000 must report them to the IRS on Form 8938, Statement of Specified Foreign Financial Assets, attached to their federal income tax return. For further information related to this statement of specified foreign financial assets, see Information for U.S. Taxpayers on Form 8938 Requirements.
The Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).
Effective July 1, 2013, filers must electronically file the FBAR through the BSA E-File System.
Filing Status and Dependents
1. I am a U.S. citizen married to a nonresident alien. What is my filing status and can I claim an exemption for my foreign spouse?
In general, if you are a U.S. citizen or resident alien married to a nonresident alien, you are considered “Married Filing Separately” unless you qualify for a different filing status. If you pay more than half the cost of keeping up a home for yourself and a qualifying child or other relative, you may qualify for the head of household filing status.
If you are a U.S. citizen or resident alien married to a nonresident alien, you and your spouse can choose to have your spouse treated as a U.S. resident for all U.S. federal income tax purposes. This allows you and your spouse to file a joint return, but also subjects your nonresident alien spouse’s worldwide income to U.S. income tax.
If you file a joint return, you can claim an exemption for your nonresident alien spouse. If you do not file a joint return, you can claim an exemption for your nonresident alien spouse only if your spouse has no income from sources within the United States and is not the dependent of another U.S. taxpayer.
2. I am a U.S. taxpayer residing abroad and I have a child who was born abroad. Can I claim my child as a dependent on my tax return?
In general, you can claim exemptions for individuals who qualify as your dependents. To be your dependent, the individual must be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins.
Children usually are citizens or residents of the same country as their parents. If you were a U.S. citizen when your child was born, your child generally is a U.S. citizen. This is true even if the child’s other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent.
You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent’s individual taxpayer identification number (ITIN) instead of an SSN.
1. When converting foreign currency to U.S. currency for purposes of filing a U.S. tax return, what foreign currency exchange rate should I use?
The Internal Revenue Service has no official exchange rate. Generally, it accepts any posted exchange rate that is used consistently.
If you have a single transaction, such as the sale of a business that occurred on a single day, use the exchange rate for that day. However, if you receive income evenly throughout the tax year, you may translate the foreign currency to U.S. dollars using the yearly average currency exchange rate for the tax year.
Green Card Holders
1. What are my responsibilities as a green card holder if I have been absent from the United States for a long period of time?
As a green card holder, you generally are required to file a U.S. income tax return and report worldwide income no matter where you live.
However, if you surrender your green card or the U.S. Citizen & Immigration Service determines that you have abandoned your green card and takes it away from you, you will need to follow the nonresident alien requirements for filing a Form 1040NR, U.S. Nonresident Alien Income Tax Return (PDF).
2. I was a long-term resident of the United States prior to surrendering my green card. What is my U.S. tax filing obligation?
You are a long-term resident for U.S. federal income tax purposes if you were a lawful permanent resident of the United States (green card holder) in at least 8 of the last 15 tax years ending with the year your residency ends. In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits.
If you are a long-term resident who has surrendered your green card, you may be subject to the expatriation tax. In general, the expatriation tax provisions apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their residency. The rules that apply are based on the dates of expatriation.
You may also be a dual status alien if you have been both a resident alien and a nonresident alien in the same tax year. Dual status does not refer to your citizenship, only to your resident status for tax purposes in the United States.
- For The Part of the Year that You are a Resident Alien, you are taxed on income from all sources: inside and outside of the United States.
- For The Part from the Time that You Abandon Your Green Card, you are taxed on income from U.S. source only.
3. I am a green card holder. May I claim residence in a foreign country under a tax treaty and obtain benefits under the tax treaty?
As a green card holder, you are a U.S. tax resident. However, the definition of residency under U.S. tax laws does not override tax treaty definitions of residency. If you are a dual-resident taxpayer (a resident of both the United States and another country under each country’s tax laws), you can still claim the benefits under an income tax treaty.
The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). If you would be treated as a resident of the other country under the tie-breaker rule and you claim treaty benefits as a resident of that country, you are treated as a nonresident alien in figuring your U.S. income tax. For purposes other than figuring your tax, you will be treated as a U.S. resident. For example, the rules discussed here do not affect your residency time periods as discussed in FAQ 17 above.
If you are a dual-resident taxpayer and you claim treaty benefits as a resident of the other country, you must file a return by the due date (including extensions) using Form 1040NR or Form 1040NR-EZ, and compute your tax as a nonresident alien. You must also attach a fully completed Form 8833 if you determine your residency under a tax treaty and receive payments or income items totaling more than $100,000. You may also have to attach Form 8938 (
Earned Income Exclusion (Form 2555)
1. What deductions and/or credits am I allowed on my U.S. income tax return as a U.S. citizen living and working in a foreign country?
U.S. citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a foreign tax credit on foreign income taxes or an itemized deduction for eligible foreign taxes. However, if you take the foreign earned income exclusion your foreign tax credit or deduction will be reduced.
If eligible, you can claim a foreign tax credit on foreign income taxes owed and paid by filing Form 1116 with your U.S. income tax return.
You may also be eligible for the foreign earned income exclusion. Please note that for purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. This includes amounts paid from both appropriated and nonappropriated funds.
2. If my foreign earned income is below the foreign earned income exclusion threshold amount, am I still required to file a U.S. individual income tax return?
Yes, since the foreign earned income exclusion is voluntary, you must file a tax return to claim the foreign earned income exclusion. It does not matter if your foreign earnings are below the foreign earned income exclusion threshold.
There are specific requirements that you must satisfy to be eligible to claim the foreign earned income exclusion.
3. Do I need to have a tax home in a foreign country in order to claim the foreign earned income exclusion?
Yes. To be eligible for the foreign earned income exclusion, you must have a tax home in a foreign country and be a U.S. citizen or resident alien. You must also be either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or you must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. U.S. citizens may qualify for the foreign income exclusion under either test. U.S. resident aliens must qualify under the physical presence test, unless they are citizens or nationals of a country with which the United States has an income tax treaty in effect. In that case, U.S. resident aliens also may qualify for the foreign earned income exclusion under the bona fide residence test.
Your tax home must be in the foreign country or countries throughout your period of bona fide residence or physical presence. For this purpose, your period of physical presence is the 330 full days during which you are present in a foreign country or countries, not the 12 consecutive months during which those days occur.
4. I have been working abroad for many years and claiming the Foreign Earned Income Exclusion using a Form 2555. I claim the Physical Presence test every year. Can you explain the difference between the so-called Physical Presence test and the Bona Fide Residence test?
To be eligible for the foreign earned income exclusion, you must have a tax home in a foreign country and be a U.S. citizen or resident alien. You must also be either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year (Bona Fide Residence Test), or you must be physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months (Physical Presence Test).
U.S. citizens may qualify under either test. But, there are specific definitions for U.S. resident aliens under each test.
Physical Presence Test
To meet this test, you must be a U.S. citizen or resident alien who is physically present in a foreign country or countries, for at least 330 full days during any period of 12 consecutive months. A full day means the 24-hour period that starts at midnight.
Bona Fide Residence Test
To meet this test, you must be one of the following:
- A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1-December 31, if you file a calendar year return), or
- A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year (January 1-December 31, if you file a calendar year return).
Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay. Evidence of your intention may be your words and acts. If these conflict, your acts carry more weight than your words. Generally, if you go to a foreign country for a definite temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country.
The two tests differ in that one is based exclusively on physical presence while the other is based on a taxpayer’s intentions.
5. Can foreign pensions be excluded on Form 2555?
Foreign pensions cannot be excluded on Form 2555. Foreign earned income for purposes of the foreign earned income exclusion does not include pensions and annuity income (including social security benefits and railroad retirement benefits treated as social security).
6. What is the difference between Forms 2555 and 2555-EZ?
The foreign earned income exclusion, housing exclusion, or housing deductions are claimed using either a Form 2555 or 2555-EZ. The Form 2555-EZ is a simplified version of the regular Form 2555 and can be used by most individuals assuming:
- You did not have any self-employment income for the year,
- Your total foreign earned income did not exceed the maximum foreign earned income exclusion threshold for the corresponding tax year,
- You did not have any business or moving expenses, and
- You do not claim the housing exclusion or deduction.
7. When am I required to use of the Foreign Earned Income Tax Worksheet when calculating my U.S. income tax?
If you claimed the foreign earned income exclusion, housing exclusion, or housing deduction on Form 2555 or 2555-EZ, you must calculate your tax liability using the Foreign Earned Income Tax Worksheet (for Line 44) in the Form 1040 Instructions or your income tax preparation software.
Expatriation: Former Citizens and Long-term Permanent Residents
1. What is the purpose of Form 8854, Initial and Annual Expatriation Information Statement, and where can I get the form?
The expatriation tax provisions apply to U.S. citizens who have relinquished their citizenship and to long-term permanent residents (green card holders) who have ended their U.S. residency. The Form 8854 is used by individuals who have expatriated to inform the IRS of their expatriation and certify they have complied with all federal tax obligations for the 5 tax years preceding the date of their expatriation.
2. I terminated my U.S. resident alien status (gave up my green card) and was told that I may still need to furnish some documents to the IRS. Can you please explain?
If you are a U.S. resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad. If you are a nonresident alien, you are usually subject to U.S. income tax only on U.S. source income. Under limited circumstances, certain foreign source income is subject to U.S. tax.
Application for IRS Individual Tax Identification Number (ITIN) – Form W-7
1. Who needs to apply for an Individual Taxpayer Identification Number (ITIN)?
You need an ITIN if you are not eligible to get a social security number but must provide a taxpayer identification number on a U.S. tax return or information return. Examples include the following:
- A nonresident alien individual eligible to get the benefit of reduced withholding under an income tax treaty.
- A nonresident alien individual not eligible for an SSN who is required to file a U.S. tax return or who is filing a U.S. tax return only to claim a refund.
- A nonresident alien individual not eligible for an SSN who elects to file a joint U.S. tax return with a spouse who is a U.S. citizen or resident alien.
- A U.S. resident alien (based on the substantial presence test) who files a U.S. tax return but who is not eligible for an SSN.
- An alien spouse who is claimed as an exemption on a U.S. tax return but who is not eligible to get an SSN.
- An alien individual who is eligible to be claimed as a dependent on a U.S. tax return but who is not eligible to get an SSN.
- A nonresident alien student, professor, or researcher who is required to file a U.S. tax return but who is not eligible for an SSN, or who is claiming an exception to the tax return filing requirement.
- A dependent/spouse of a nonresident alien U.S. visa holder, who is not eligible for an SSN.
ITINs are for federal tax reporting only and are not intended to serve any other purpose. The IRS issues ITINs to help individuals comply with the U.S. tax laws and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs).
An ITIN does not provide authorization to work in the United States or provide eligibility for Social Security benefits or the Earned Income Tax Credit.
2. When and how do I apply for an Individual Taxpayer Identification Number (ITIN)?
You need an ITIN as soon as you are ready to file your federal income tax return, since you need to attach the return to your application. To apply for an ITIN, complete Form W-7, Application for IRS Individual Taxpayer Identification Number.
There are exceptions to the requirement to include a U.S. tax return with the Form W-7. For example, if you are a nonresident alien individual eligible to get the benefit of reduced withholding under an income tax treaty, you can apply for an ITIN without having to attach a federal income tax return
3. I am a nonresident alien living in a foreign country and I will receive U.S. source royalty income. Do I need to obtain an ITIN?
U.S. source royalty income paid to a nonresident alien generally is subject to a 30% U.S. federal income tax. If you are claiming a reduced rate of U.S. federal income tax on U.S. source royalty income under a tax treaty, you should obtain an ITIN and provide it to the withholding agent on a Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (PDF). The Form W-8BEN is not filed with the IRS.
4. I am a nonresident alien in a foreign country. I was notified that I inherited some money in the United States. The executor requests that I provide a tax identification number. Is it sufficient to provide them with a foreign tax identification number?
No. The executor is required to include a Schedule K-1 (Form 1041) for each beneficiary when filing Form 1041, U.S. Income Tax Return for Estates and Trusts, for a decedent’s estate. The Schedule K-1 must provide the beneficiary’s tax identification number.
Additionally, a nonresident alien heir or beneficiary who wishes to claim applicable reduced rates of U.S. federal income tax on distributions from the estate under a tax treaty should file with the executor of the estate a Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding (PDF), which must provide the individual’s tax identification number. Please refer to Income Tax Return of an Estate—Form 1041 in Publication 559, Survivors, Executors, and Administrators. The Form W-8BEN is not filed with the IRS.
If the heir or beneficiary does not have a social security number, he/she must apply for an ITIN from the IRS.
5. I sent in an ITIN application with a Form W-7 and a notarized copy of my foreign passport. However, my application was not accepted due to the notarized copy. Why was the notarized copy not accepted?
Effective January 1, 2013, the IRS implemented new procedures for issuing new ITINs. Specifically, the new procedures apply to most applicants submitting Forms W-7 after June 21, 2012.
Under these new procedures, Forms W-7 must include original documentation such as passports and birth certificates, or copies of these documents certified by the issuing agency.