Considering Living Abroad? Here's What You Need To Know About Paying Taxes

Posted on: 4 September 2019

There are many reasons why you might consider living in another country while retaining your U.S. citizenship. For example, perhaps you got a job teaching English to children in another country. No matter the reason, it is important to realize that you will likely still need to file and pay your taxes. If you fail to pay your taxes, you could face issues that are best handled by a tax resolution specialist.

Living Abroad

There are specific laws that require all citizens of the United States, no matter their location, to file a tax return, even if you live and earn money in a country other than the United States. However, there are situations in which you may be considered for exclusions based on foreign earned income. Keep in mind that exclusions do not apply to people who don't qualify under the following conditions:

  • Receive pay as either civilian or military persons employed by the U.S. Government or its agencies
  • Receive pay for work performed in international waters
  • Receive pay while in a combat zone according to Executive Orders given by the President

If you are unsure whether you qualify for exclusions, you should speak to a tax resolution specialist. A tax resolution specialist can help you determine how best to file and whether you owe the IRS money or not based on your status, income, and other factors.

Tax Rules and Regulations

Each country has unique tax laws and regulations. There are, of course, countries that have no income tax rules, which includes the following countries:

  • United Arab Emirates
  • The Bahamas
  • Bermuda
  • Monaco

Then there are countries that have either a residence-based tax system or a territorial-based tax system. For territorial rules and regulations, you must pay taxes earned within the territory. For residence rules and regulations, you must pay taxes no matter where your income comes from in the world, but only if you live in the country.

The United States, on the other hand, has a much different system that is unlike both residence and territorial-based systems. U.S. residents pay taxes based on a citizen-focused system. In other words, you will pay taxes no matter where your income comes from and even if you are living abroad.

Double Taxation

You may worry that you will need to pay taxes to the U.S. as well as the country you live in. Fortunately, there are rules and regulations. If you are an expatriate living in another country, you should still file a tax return, even if you do not believe you owe taxes to the United States. By filing a tax return, you could fall under a code that either eliminates or reduces your obligation to pay back taxes to Uncle Sam, thereby preventing double taxation of the income you earned as a U.S. citizen.

Many people who live abroad or become expats do not realize they must still file a tax return. It is often commonly believed that if you earn money while living in a different country, that means your tax obligation is to that country rather than the United States. As such, it is also understandable that you might face issues once the U.S. catches on to your earnings.

If you face issues with the IRS hounding you for money owed on previous earnings while living abroad, you will need help from a professional. A tax resolution company can assist you with your problem. Make sure you obtain all the necessary paperwork you need, which will include a statement of your earnings and where you lived when you received your income.

With all the right paperwork in order, a tax resolution expert can assist you in resolving your issues with the Internal Revenue Service and the possibility of double taxation.

For more information, contact a company like Inside Out Tax Resolution Services.