United States Citizens
US Expatriate Tax
United States citizens and lawful permanent residents are required to file a United States tax return every year regardless of where they reside in the world, making US expatriate tax compliance compulsory. An exemption from filing is available if the individual’s income falls below a specified income threshold and meets certain other criteria required in order to qualify.
Certain disclosures to the United States government may also be required to be made on an annual basis. These are in addition to the requirement to file a United States tax return.
Disclosures may need to be made about financial accounts held with financial institutions located outside the United States, including signing authorities, which may be held either by the individual, or organizations in which the individual has a financial interest or for which the individual holds a signing authority.
Shareholdings in corporations located outside the United States, and interests in foreign trusts and foreign partnerships are also required to be disclosed in certain circumstances. Complex rules exist under the Internal Revenue Code requiring, in some cases, income from foreign corporations and foreign trusts to be attributed to a United States citizen or lawful permanent resident.
Should disclosures be required to be made, they may need to be filed together with the United States tax return, or separate to the return, all annually by a due date. Fines imposed on the individual for non-disclosure are as high as US$10,000 per corporation, and 35% of the gross value of property transferred to or distributed by a foreign trust. Receipts of foreign gifts may also be reportable transactions attracting penalties for non-disclosure.
Preparation and filing of the United States income tax return
The United States income tax return is prepared on a calendar-year basis for most taxpayers. The due date for filing the individual’s return, without extension of time for filing, is 15 April of the year following the tax year for which the return is prepared.
United States citizens and lawful permanent residents residing outside the United States are granted an automatic extension for filing of two months until 15 June. All tax must still be paid by the original due date for filing, 15 April. This applied to all who pay US expatriate tax.
Non-resident aliens are required to file a return by 15 June unless they receive wages subject to withholding tax, in which case the due date is 15 April.
United States citizens and lawful permanent residents may apply for an extension of time for filing for six months from the original due date, therefore until 15 October of the same year. This may be done either by submitting Form 4868 or making a payment of the estimated tax due.
Corporations’ income tax returns are due by 15 March of the year following the tax year for which the return is prepared. If an extension of time for filing is applied for, the corporation has until 15 September of the same year to file. Extension of time for filing is not an extension of time for payment. In order to avoid penalties and interest for unpaid tax, payment is required to be made by the original due date of the return, together with instalments of estimated tax by the due dates, where required.
Methods
Under the Internal Revenue Code, different methods may be available for the way in which items of income and expenditure are returned. Using different methods sometimes results in different tax positions, with one method resulting in a more favourable outcome than another method. Numerous tax credits, deductions and personal exemptions vary depending on the method engaged. Other factors impacting on the final tax position include the Alternative Minimum Tax and state taxation.
NZ US Tax Specialists has a reputation for being diligent, timely and thorough with the preparation of United States income tax returns. Within the constraints of ethical and legal obligations, where there is a choice in methods available, the method resulting in the best outcome will be used.
Please visit OUR SERVICES page to learn about how we can assist you with your US expatriate tax obligations and filing.
