July 23, 2021
Taxes for foreign income need filing for citizens living abroad
Many Texas residents may feel the urge to leave the state or even the country for an extended time. Some people prefer to live abroad for a year or two to gain a new experience while retaining their United States citizenship. However, even if a person is working in another country and does not earn any income in the United States, that person still owes taxes on that foreign income.
It may seem illogical that an individual would owe taxes when the money earned did not have any association with the United States. However, as long as a person is a U.S. citizen, that individual has a tax obligation to the country. If individuals think that the IRS will not find out about any foreign accounts or income, they may want to think again. The Foreign Account Tax Compliance Act requires foreign banking institutions to provide banking and tax information for U.S. citizens living abroad to the IRS.
Unfortunately, citizens living abroad can often find themselves in hot water with the IRS come tax time, commonly for the following reasons:
- They did not think they had to file taxes in the United States because the country has a tax treaty with the country in which they currently reside.
- They thought that only people living in the United States had to pay taxes to the IRS.
- They thought that they did not owe taxes to the United States if their foreign income was less than $100,000.
Any tax issue with the IRS can be difficult to handle, but when it comes to issues pertaining to foreign income, the situation may be even more complicated. Before panicking, individuals in this predicament may want to gain reliable information from Texas tax attorneys who could assess their specific cases to determine the exact issues and the options that may be available. In some cases, taxpayers may be able to find penalty relief or to take other steps to lessen the consequences of not filing or filing late.