US Tax Basics for US Expats

The US and Eritrea are the only two countries in the world that tax based on citizenship rather than just residency. That is, all US citizens and permanent residents ("US persons") whose gross income is at least as much as the standard deduction in US dollars for the year must file a return with the IRS, no matter where they live and no matter where the income is derived from. The standard deduction, for the 2019 tax year, is $12,200 for single taxpayers and married individuals filing separately, $18,350 for heads of households, and $24,400 for married filing jointly.

Note that for the purpose of US income tax, permanent residents remain permanent residents until they voluntarily renounce green card status, or their permanent residence is terminated by USCIS or a US federal court.

Also, for the 2019 tax year, all US persons who have at least $400 of self-employment income must file a US tax return, even if gross income is below the standard deduction amounts listed above.

You can also try the IRS's Do I Need to File a Tax Return? tool.

US persons can use the Foreign Earned Income Exclusion and/or the Foreign Tax Credit to eliminate or reduce double taxation.

Generally, if both your tax home and your abode are outside the United States and Puerto Rico on the regular April 15 due date, you get an automatic 2 month extension to June 15 to file. Note, however, that this is not an extension to pay; any balance due must be made by the original April 15 due date. So you should try your best to calculate both US and Canadian tax before April 15 in order to pay any US balance due in time. The April 30 due date for Canada is not extendable. You need to calculate both US and Canada tax liability before foreign tax credit in order to compute the foreign tax credits to take on each return.

Since I assume most expats have been doing US taxes for a while, and there are plenty of resources to learn about US tax, I cover only the aspects relevant to US expats (used loosely to mean US citizens and permanent residents living outside the US). I reference Canada, but a lot of this information applies to US persons living in other foreign countries as well.

List of Possibly Required US Tax Forms

Income Tax Return Forms

The following US tax forms often need to be filed by US persons living abroad:

Foreign Disclosure Forms

The FBAR and 8938 disclosure forms are especially important, because failure to file these forms could result in minimum penalties of $10,000 for non-willful infractions:
To facilitate preparation of FBAR, Form 8938, and Canada's T1135, I keep a spreadsheet listing all of my bank, investment, and retirement accounts in both countries.

Note that on both FBAR and Form 8938, if you are required to file, you need to list all foreign accounts that were open at any time during the year, even if you never used the accounts and you closed them during the year. I realized this after filing my FBAR and remembering the unused accounts that some zealous Canadian bankers had opened for me that I had closed after a few months; I filed an amended FBAR to report those accounts. US currency accounts, including the ones at TD Canada that I recommend, also need to be reported on both FBAR and Form 8938.

Other Forms

The following forms may also be required for certain persons:

Important warning! I do not provide tax, legal or accounting advice. I am writing this guide only for informational purposes, and based heavily on my own unique personal facts and circumstances. And I am a unique individual with a unique background and my unique set of personal facts and circumstances, so what is applicable to me might not be applicable to you. This guide, like all other content in this blog, is not intended to provide, and cannot be relied on for, tax, legal or accounting advice. You are responsible for consulting your own tax, legal and accounting advisors to obtain advice on your personal situation.

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