US tax info |
US international taxation of individuals
US taxpayers (citizens and permanent residents, a.k.a. green-card holders) are taxed on their worldwide income, no matter where in the world they reside. They will not always, and often not, owe tax to Uncle Sam on their foreign-sourced income (see Your US Tax Liability) because they are paying tax to that foreign country or are earning less than the foreign earned income exclusion. However, even if they do not owe tax to the IRS they must still file a US tax return if they exceed the normal filing thresholds.
If you are a US taxpayer living abroad, especially if you are Residing in the UK, there are several things you should know to ensure you are in compliance with the international taxation rules and regulations of the IRS. The first has been mentioned above: if you are a US citizen or green-card holder and have gross income above the normal Form 1040 filing thresholds, you should be filing a tax return to the IRS even if you do not have any income from and assets in the US. How much tax will you owe? See our page on Your US Tax Liability for a brief explanation of how your worldwide income will be taxed.
As well as an income tax return, there are several obligations for information returns that you may incur whilst living abroad. The most common of these is the requirement to file a Form 114 Foreign Bank Account Report (FBAR, "eff-bar"). You must file this if you have foreign bank or financial accounts which exceed $10,000 in aggregate value at any time during the year.
Along with the FBAR, since Tax Year 2011 the Foreign Account Tax Compliance Act (FATCA) has been in force for individuals. The ultimate purpose of FATCA is to force foreign financial institutions to report information to the IRS in the same way as domestic ones. For individuals, this means including Form(s) 8938 with your 1040 tax return if you meet the filing thresholds. See our FBAR & FATCA page for more details on Form 114 and Form 8938.
Furthermore, there are also rules relating to which type of non-US financial assets you may hold. Many non-US financial assets fall foul of the Passive Foreign Investment Company (PFIC, "P-fick") rules. A PFIC is essentially any foreign mutual fund. The PFIC rules are designed to restrict the ability to hold foreign mutual funds rather than domestic ones to delay or reduce US income tax that would otherwise be owed. Please see our PFIC information page for more details.
US taxpayers (citizens and permanent residents, a.k.a. green-card holders) are taxed on their worldwide income, no matter where in the world they reside. They will not always, and often not, owe tax to Uncle Sam on their foreign-sourced income (see Your US Tax Liability) because they are paying tax to that foreign country or are earning less than the foreign earned income exclusion. However, even if they do not owe tax to the IRS they must still file a US tax return if they exceed the normal filing thresholds.
If you are a US taxpayer living abroad, especially if you are Residing in the UK, there are several things you should know to ensure you are in compliance with the international taxation rules and regulations of the IRS. The first has been mentioned above: if you are a US citizen or green-card holder and have gross income above the normal Form 1040 filing thresholds, you should be filing a tax return to the IRS even if you do not have any income from and assets in the US. How much tax will you owe? See our page on Your US Tax Liability for a brief explanation of how your worldwide income will be taxed.
As well as an income tax return, there are several obligations for information returns that you may incur whilst living abroad. The most common of these is the requirement to file a Form 114 Foreign Bank Account Report (FBAR, "eff-bar"). You must file this if you have foreign bank or financial accounts which exceed $10,000 in aggregate value at any time during the year.
Along with the FBAR, since Tax Year 2011 the Foreign Account Tax Compliance Act (FATCA) has been in force for individuals. The ultimate purpose of FATCA is to force foreign financial institutions to report information to the IRS in the same way as domestic ones. For individuals, this means including Form(s) 8938 with your 1040 tax return if you meet the filing thresholds. See our FBAR & FATCA page for more details on Form 114 and Form 8938.
Furthermore, there are also rules relating to which type of non-US financial assets you may hold. Many non-US financial assets fall foul of the Passive Foreign Investment Company (PFIC, "P-fick") rules. A PFIC is essentially any foreign mutual fund. The PFIC rules are designed to restrict the ability to hold foreign mutual funds rather than domestic ones to delay or reduce US income tax that would otherwise be owed. Please see our PFIC information page for more details.
Our motto: "Never ignore a letter from the IRS (or HMRC)"