Webinar: Ask a CPA anything about US expat taxes
We recently hosted a live webinar to help US taxpayers – both expats and US-based – navigate new tax savings, credits, and compliance updates for the 2024 tax season.
This session was designed to address the latest IRS updates, common tax pitfalls, and smart strategies to help attendees save money and stay compliant. If you missed it, we have you covered with a full recap.
Below, we summarize the key takeaways and top client questions answered by our expert CPA, Rebecca O’Malley.
Whether you are living abroad or in the US, these insights will help you optimize your tax situation, maximize deductions and credits, and avoid costly mistakes that often come with international tax filings.
Key webinar insights and topics covered
- New and updated tax credits and deductions for US taxpayers, including those living overseas.
- Practical strategies to maximize deductions and reduce taxable income, including the best ways to combine Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC).
- Updates on IRS compliance requirements, including FBAR, FATCA, and reporting of foreign accounts and assets.
- Clarification on retirement account strategies for expats, including Roth IRA contributions, 401(k) rollovers, and tax-efficient withdrawals.
- Deep dive into state residency rules, including how to manage state tax filing requirements when living abroad or relocating.
- Real-life client questions covering complex areas such as inheritances, real estate sales, double taxation, pension reporting, and foreign business ownership.
Upcoming IRS deadlines to keep in mind
- March 17, 2025 – Business tax deadline (for partnerships and S corporations).
- April 15, 2025 – First estimated tax payment for 2025 and individual tax filing deadline for US-based taxpayers.
- June 16, 2025 – Expat tax filing deadline, automatically extended from April for Americans living abroad.
Also read – Expat tax due dates and deadlines
Pro tip: If you need more time to file, you can request an extension to October 15 directly through your TFX portal. It is a fast and hassle-free process that gives you peace of mind without any penalties for late filing – as long as taxes owed are paid on time.
These key insights and deadlines are essential to stay ahead during tax season. Below, we dive into some of the most useful and engaging questions from the live Q&A, covering real situations many expats face.
Questions and answers from the webinar
Q: I am about to retire in Spain. Would converting my 401(k) to a Roth IRA be a good idea, given that Spain may tax US income that is not from federal retirement?
A: It depends on how much you are converting and how the US–Spain tax treaty handles double taxation.
Typically, if Roth conversion makes sense while living in the US, it could also be reasonable abroad – but only if you understand who provides double tax relief. A thorough review of the treaty terms is essential before proceeding.
Q: As a non-resident, do I have to pay withholding on inherited capital even if there is no income in the estate?
A: Yes, through Form 706-NA if the inheritance involves US-situs property. Whether withholding applies depends on whether the property is tangible, intangible, or real estate located in the US.
Q: If I cancel my US rental while traveling abroad and have no physical address, can I choose which state to file taxes in?
A: No, state filing is based on domicile, not choice. While you cannot pick a state arbitrarily, you can plan to establish domicile in a state with favorable tax laws. Each state has specific residency rules that must be followed.
Q: What is the tax liability for an expat rolling over a 401(k) into a Roth IRA? I’ve heard it could be 30% or nothing at all.
A: Roth conversions are taxed as ordinary income, similar to wages. The exact rate depends on your total income for the year. Converting smaller amounts may help you avoid higher tax brackets. It is not a flat 30% – careful planning is key.
Q: I live and work in the UK with a private employer-sponsored pension. Should I report my pension as income or on FBAR?
A: This was addressed live during the session. Please contact us if you would like a written summary of the response.
Q: Does TFX work only with expats, or can you help US-based taxpayers with foreign income?
A: We work with both! Many of our clients live abroad, but we also assist US-based individuals with foreign income, investments, or other international tax matters.
Q: Can TFX help expats (such as New Zealand citizens) living in the US and working for a New Zealand company?
A: Yes. This was addressed live during the webinar.
Q: How can a US citizen living in Germany invest without triggering PFIC issues?
A: Many German and EU-based ETFs are considered PFICs by the IRS, leading to unfavorable tax treatment. One approach is to use US-domiciled funds. Each case is different – we recommend a personalized consultation to develop a compliant investment strategy.
Q: I plan to convert $32,000 from my 401(k) to a Roth IRA. Should I do it?
A: After reviewing the US–Spain treaty to determine who provides double tax relief, this could be a good idea. Converting in a low-income year is preferable to avoid higher tax brackets.
Q: If the inheritance is all cash, does US tax apply?
A: Generally, cash inheritances are not taxed in the US, but reporting might be required if thresholds are exceeded – especially for foreign inheritances. Proper reporting is key to avoiding penalties.
Q: If I retire in Mexico and earn interest from US bank accounts, will I owe taxes in Mexico?
A: Likely yes, since most countries, including Mexico, tax worldwide income. Tax treaties determine who provides relief. Consult a local advisor or TFX for cross-border planning.
Q: After selling a home in Costa Rica owned via a dormant corporation, what US filings are required?
A: Form 5471 for the corporation and reporting the sale on your US tax return. Depending on the sale amount, Form 8938 may also apply. Professional guidance is strongly recommended.
Q: Does having power of attorney over German relatives’ bank accounts require US reporting?
A: Possibly. You may need to report the accounts on FBAR if you have signature authority. No direct income tax implications unless you benefit from the funds.
Q: Can TFX help review my UK self-assessment if I already use you for US taxes?
A: While we specialize in US taxes, we can refer you to trusted UK accountants and coordinate with them through your TFX account.
Q: Where should private healthcare provided by my UK employer be reported?
A: This was addressed live during the webinar.
Q: How are IRA withdrawals in Turkey taxed?
A: If it's a US IRA, taxation depends on whether it is Roth or Traditional. Traditional IRAs are taxable when distributed unless treaty provisions apply. Clarification is needed if it’s a Turkish retirement account.
Q: I live in Canada as a Green Card holder and run a consulting business. Some clients are in the US. Is this foreign or US income?
A: Income is sourced where the work is performed. Since you work in Canada, it is foreign income.
Q: If I earn US income while living in Mexico full time, is that US or foreign income?
A: Addressed live during the webinar.
Q: Are there special requirements for my situation?
A: Addressed live during the webinar.
Q: Does real estate need to be reported under FATCA?
A: Directly owned foreign real estate is not reported under FATCA, but owning it through a foreign entity could trigger reporting. Any income or gain from foreign property must be reported on your tax return.
Q: What are safe UK investment options from a US tax perspective?
A: Avoid SIPPs and foreign ETFs in ISAs due to PFIC issues. Consider US-based funds or employer retirement plans. ISAs can be beneficial if structured properly.
Q: As an expat in the UK, how do I file US taxes?
A: You can file electronically using TFX or expat-friendly platforms. Some forms, like FBAR, must be filed separately through FinCEN. Professional help is recommended due to complexities.
Q: Does one need to wait five years before withdrawing from a Roth IRA?
A: Answered live.
Q: If a property is rented, does it affect FBAR and FATCA reporting?
A: Yes, rental income and ownership via an entity could trigger FATCA or FBAR filing.
Q: Is there a 30% tax on Roth conversions for expats?
A: No, that rate applies to nonresident aliens. US citizens and residents pay ordinary income tax rates.
Q: If I never filed FBAR or FATCA after moving to the US, can I use Streamlined Procedures?
A: Answered live.
Q: Does TFX handle trusts for real estate in Italy?
A: Answered live.
Q: How do I relinquish a Green Card to avoid future US taxes if retiring abroad?
A: File Form I-407, but long-term residents may face US Exit Tax. Professional tax planning is essential.
Q: Can I contribute to Roth IRA as an expat?
A: Yes, but you need earned income and may not be able to claim FEIE and contribute in the same year.
Q: How do German pension plans (e.g., Riester, Rürup) get taxed in the US?
A: The US may tax them. Treaty provisions may help, but details vary. A tax planning session is recommended.
Q: How do I avoid double tax on 401(k) withdrawals if I live in Mexico?
A: Tax treaties determine who relieves double taxation. Moving funds between accounts is not taxable, but the distribution is.
Q: Does TFX provide help if I’m already dealing with IRS issues?
A: Yes, we assist clients with IRS notices, amendments, and ongoing issues.
Q: Can I access a recording of the webinar?
A: Yes, a recording and follow-up email will be sent to attendees.
Q: Does TFX offer free consultations?
A: Yes, a free initial consultation is available. Some services may require a small retainer that is applied to fees if you proceed.