THE TRANSATLANTIC MAGAZINE
On May 6, 2021 The American hosted a webinar with Katelynn Minott CPA, a partner at Bright!Tax and a leading global expert in US expat taxes, and Charles Bruce, legal counsel to American Citizens Abroad. Katelynn and Charles answered many good questions on issues affecting overseas Americans but there wasn’t time to deal with all of them, so here are 10 more, with answers that will help all US expats.
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Q: I got the round one stimulus check but not the round two or three. Is that the same for US citizens abroad?
A: No, expats should get all three rounds. You should file your 2020 tax return, and IRS will provide a refund for the second stimulus payment you’re owed. The 3rd stimulus payment will be available as part of the 2021 tax return filing.
Q: Will late filers qualify for the checks?
A: Yes, as refunds requested as part of 2020 and 2021 tax returns.
Q: Does everyone qualify for the stimulus checks regardless of income level?
A: No, there are maximum income levels where the relief begins to phase out. The stimulus payment goes away entirely at$99,000 of Adjusted Gross Income (so income after exclusions etc.) per individual (so $198,000 for joint filers) for the first two rounds, then $75,000 per individual for the third round.
Q: Is the Foreign Mutual Fund for owners only, or for small scale participants? I refer to Form 8621z.
A: If you own shares in a foreign mutual fund then you should look into filing Form 8621. Certain thresholds, exceptions and elections may apply so this should be carefully evaluated by an expat tax specialist on an individual basis.
Q: What are the FBAR due dates?
A: The FBAR (IRS Report of Foreign Bank and Financial Accounts) deadline is technically April 15th, however the US Treasury offers an automatic extension to October 15, which you do not have to apply for. So in practice, the FBAR deadline is October 15th.
Q: Do foreign banks tell the US that an expat has an account at that bank?
A: The vast majority of foreign banks report their US citizen account holders to the US.
Q: How can taxpayers living abroad get receipt or status information for tax returns?
A: The starting point should be using the IRS online services to request either a transcript, or economic stimulus payment information. If you’re unable to access the information online, which often occurs when your mailing address is abroad, then it may be necessary to call the IRS and speak with a representative, whom you can ask for a transcript or information about the status of your stimulus payment. However, the IRS isn’t answering many calls at the moment, in practice.
Q: Do I have to report accounts above the limit for both FBAR and FATCA?
A: You must report all accounts that are open on the FBAR and/or FATCA once you’ve reached the thresholds for those forms. For example, if you have more than $10,000 USD in total financial accounts abroad, you’ve triggered the requirement and have to report all open (even $0 accounts). The individual account balance is not significant once you’ve “tripped” the filing threshold. The limits are different for FBAR and FATCA (Form 8938) reporting and 8938 thresholds vary based on your country of residency and your filing status.
Q: Do foreign life insurance policies and IRAs need to be declared on FBAR?
A: Yes. Life insurance policies with a cash value, in particular, need to be reported. IRA-style foreign pensions should also be reported.
Q: Could one claim Foreign Earned Income Exclusion and Foreign Tax Credit in the same return?
A: Yes! You may use both of these tools on the same tax return. Note though, that you can’t apply them to the same income. For example, you can’t exclude your wage income from tax and then use the tax you paid on that wage as a foreign tax credit.