ExpatCPA with virtual office discusses US tax return preparation including Form 2555, Form 673, W-8IMY, FBAR, Form 1116

Hi, I’m Gary Bode, an expatCPA. This FAQ post discusses the most common tax issues I field for expats who want to self-prepare their income taxes.

IRS tax Form 2555, Foreign Earned Income

Form 2555 calculates the foreign earned income exclusion and foreign housing deduction. The Form 2555 instructions are a little dry and they cover multiple situations. They make self-tax preparation appear daunting. But the potential $35,000 or so of tax savings should be an incentive. Here’s the Form 2555 basics.

IRS tax Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911

Form 673 is like the better known W-4. It allows your employer to not withhold federal income tax on your foreign assignment wages. Basically your federal withholding comes down to a choice between receiving more of your gross wages with every pay check, or getting a bigger refund once you file your tax return with Form 2555. Here’s an earlier post on Form 673 planning.

Form W-8IMY, Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding

Most of my expat clients still bank in the US. But the FATCA program requires foreign banks to divulge US expat account information. Your foreign bank may ask you to complete Form W-8IMY. This is just a reporting requirement. But the from foreign banks is taxable. Here’s some more Form W-8IMY info.

FBAR, TD F 90-22.1, Report of Foreign Bank and Financial Accounts

Again the FATCA program cracks down on offshore banking. You must file a FBAR on June 30th to report your highest foreign bank balance, if more than $10,000 USD, for the prior calendar year. The $10,000 non-filing penalty makes filing FBAR prudent. Here’s more FBAR information.

Form 1116, Foreign Tax Credit

Some expats get dinged with foreign taxes during their international assignment. Form 1116 gives you a US tax credit for foreign taxes you paid. Lots of IRS wrinkles of course. Here’s some more Form 1116 info.

Form 8938, Statement of Specified Foreign Financial Assets

Form 8938 reports your foreign assets to the IRS. Here’s some Form 8938 info.

What should your ExpatCPA do for you?

• US expat tax planning. Your international assignment merits some US tax positioning to proactively structure you to pay the least amount of tax.
• US tax return preparation. Can you self-prepare? Maybe. Read the IRS tax Form 2555 instructions.
• US tax form compliance. Penalties are stiff.
• Look for an expatCPA who offers convenience. I gradually built a virtual office as my practice began to specialize in expat income tax preparation and tax planning.

Tips I’ve picked up as an expatCPA

• Your foreign earned income exclusion from Form 2555 isn’t the only tax break. Under the right conditions you can earn $107,600 before any US tax cuts in.
• Move to a State with no income tax before the foreign assignment.

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