Annual tax forms reported to the IRS
| Form name |
Form description |
Where you get it |
|
W2
|
Wages and tax statement
|
U.S. employer
|
|
1099- MISC
|
Miscellaneous income
|
Business, government agency, or a trust that paid you $600 or more during the calendar year
|
|
1099-R
|
Retirement plan distributions |
Pensions, annuities, retirement or profit-sharing plans, IRAs,
Insurance contracts that made a distribution of $10 or more to you during the calendar year
|
|
1099-B
|
Proceeds from broker and barter exchange |
Financial institution that has sold for you stocks, bonds, commodities,
or other financial instruments for cash or through a barter exchange
|
|
1099-INT
|
Interest income
|
Financial institutions that paid you at least $10 of interest during the calendar year
|
|
1099-DIV
|
Dividends and distributions
|
Financial institutions that paid you dividends (including capital gain dividends)
and other distributions on stock of $10 or more during the calendar year
|
|
1099-A
|
Aquisition or abandonment of secured property
|
Any entity that lent you money and acquired property securing the debt as
full or partial satisfaction of the debt
|
|
1099-C
|
Cancellation of debt
|
A qualified lender to whom you owed $600 or more and who cancelled your debt
|
|
1098
|
Mortgate interest statement
|
Lending institution that received from you $600 or more of mortgage interest
including points during the calendar year
|
|
1098-E
|
Student loan interest statement
|
Financial institution, government unit or education institution that received from you
interest payments of $600 or more during the year on qualified student loans
|
|
1098-T
|
Tuition statement
|
Eligible educational institution that received from you payment for qualified tuition and related
expenses or made to you reimbursements of qualified tuition and related expenses
|
|
1098-C
|
Contributions of motor vehicles, boats, and airplanes
|
A charitable organization to which you donated a qualified vehicle with the claimed value of more than $500
|
|
2555
|
Foreign earned income
|
Form 2555 used to calculate foreign earned income exclusion and housing exclusion for those who qualify
|
|
Schedule K-1
|
A beneficiary’s share of income, deduction, credits, etc.
|
Pass-through entities including limited partnerships, S Corporations, income trusts,
and Limited liability companies
|
Expat tax terms
Back taxes
Taxes that have not been paid on the due date or were underreported either by accident or by intention on a
past tax return. The tax authorities (IRS) can demand payment of back taxes as well as impose penalties
and/or interest.
Bona fide residence test
The bona fide residence test requires the taxpayer to be a bona fide resident of a foreign country or
countries for an uninterrupted period that includes a full tax year.
To meet this test, you must be one of the following:
-
A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period
that includes an entire tax year or
-
A U.S. resident alien who is a citizen or national of a country with which the
United States has an income tax treaty in effect and who is a bona fide resident of
a foreign country, or countries, for an uninterrupted period that includes an entire tax year
We have written a full article on the Bona fide residence test
Dual status alien
You are a dual status alien when you have been both a resident alien
and a nonresident alien in the same tax year. Dual status does not refer to your
citizenship, only to your resident status for tax purposes in the United States. In determining your U.S.
income tax liability for a dual-status tax year, different rules apply for the part of the year you are a
resident of the United States and the part of the year you are a nonresident. The most common dual-status
tax years are the years of arrival and departure.
Expatriate
An expatriate is a person temporarily or permanently residing in a country other than that of the person's
legal residence
Foreign earned income exclusion
Qualifying U.S. citizens and residents working outside the United States are permitted to elect
to exclude a portion of their foreign earned income under the Internal Revenue Code (IRC). This section
provides a general exclusion limited to a specified amount, another exclusion measured by foreign housing
costs, and, for self-employed persons, a foreign housing cost deduction.
To qualify for the foreign earned income and housing cost exclusions, the individual must have foreign
earned income, his or her tax home must be in a foreign country, and he or she must meet bona fide residence test physical presence test.
U.S. citizens may qualify under either the bona fide residence or physical presence test. A U.S. resident alien working abroad can qualify under the physical presence test, and in
certain limited cases, tax treaty nondiscrimination rules may permit qualification under the bona fide
residence rule.
Foreign tax credit
The U.S. tax code that taxes citizens and permanent residents on worldwide income
offers a foreign tax credit to mitigate the potential for double taxation. The credit generally
applies only to taxes of a nature similar to the tax being reduced by the credit (i.e., taxes based on
income). The source of income is determined separately for each type of income. This credit is limited
to the amount of tax attributable to foreign source income.
Host country
The country in which the expatriateresides.
Housing allowance/reimbursement
An amount paid by the company to enable the expatriate to rent or lease housing in the host country. A
housing allowance is an amount generally paid to the assignee representing the company's contribution to
his/her local housing. An allowance is generally a set amount and may be more or less than the actual
housing costs incurred. A housing reimbursement is generally an amount paid either directly to the property
owner/landlord or to the assignee, and is a direct reimbursement of the actual cost of housing.
Installment agreement
Agreement with the IRS that allows the taxpayer to pay back tax debt in smaller,
more manageable amounts. There are tax debt solutions available for those in need.
IRS power of attorney
The legal form
giving an authorized
individual (Certified Public Accountant, Enrolled Agent or attorney) authority to represent the taxpayer
before the Internal Revenue Service.
Minimum threshold
All U.S. citizens and green card holders are required to file a federal tax return each year if their income
is over the minimum threshold. It doesn't matter where the income was earned, and it doesn't matter if taxes
are paid locally. The federal thresholds are currently:
- single filers with income over $8,950
- married filers filing jointly with income over $17,900
- married filers filing separately with income over $3,500.
If you are self-employed, you still have to pay self-employment tax (Social
Security), which must be paid without regard to the foreign earned income
exclusion. The Social security administration
web site details how it will work in your
circumstance, but generally speaking, you will either need to
pay U.S. Social Security taxes or opt out of it. You probably
never thought about this, and you may already pay a local
version of this tax (such as National Insurance in the U.K.).
If you have not filed in a few years, this can add up, and
you may owe thousands or hundreds of thousands of dollars.
Non-resident alien
A nonresident alien is an any individual who is not a U.S. citizen or U.S. national and who has not passed
the green card test or the substantial presence test.
Physical presence test
To meet this test, you must be a U.S. citizen or resident alien who is
physically present in a foreign country or countries, for at least 330 full days during 12 consecutive
months.
This test is based only on physical presence and does not depend on the type of residence you establish or
the purpose of your stay. You do not have to be in a foreign country for employment purposes the
entire time – vacation periods also count toward meeting the total number of days.
The 330 days do not have to be consecutive and can be interrupted by periods when you are traveling over
international waters or are otherwise not in a foreign country. To figure out whether you qualify for
the minimum of 330 full days of presence, add all separate periods you spent outside of the US during the 12
month period.
A nonresident alien who, with a U.S. citizen or U.S. resident alien spouse, chooses to be taxed as a
resident of the United States may qualify under this test if the time requirements are met.
We have written a full article on the Physical
presence test
Resident alien
Applies to non-U.S. citizens currently residing in the United States. For example, green card holders by
definitions are resident aliens. While they temporarily reside outside of the U.S., they can keep the
green card and remain resident aliens in the eye of the INS and the IRS.
Split pay
Payment of expatriate’s estimated local living costs in local currency and the
remainder in home-country currency.
Statute of limitations
A statute limiting the period within which a specific legal action may be taken, such as the collection of
tax, appeal from a decision of the tax authorities or lower court, etc.
If you do not file a tax return for a given tax year, the statute of limitations for that year.
Therefore it is advisable to file a return for each year, even if your taxable income falls below the
minimum amount required. This is done in order to cause the statute of limitations to run out.
If you do file your tax return each year while living abroad, the statute of limitations for IRS
audits will expire three years after you file those returns. This means that the IRS cannot go back (absent
fraud) and try to audit or challenge those returns later. Therefore, you should file your return even if you
have no income or don’t owe taxes in order to force the statute of limitations to run out and eliminate
future problems when you decide to return to the U.S.
Tax incentives for higher education
The tax code provides a variety of tax incentives for families who are saving for, or already paying, higher
education costs or are repaying student loans.
You may be able to deduct interest you pay on a
qualified student
loan.
You can also claim tax credits or income deduction for the qualified tuition and related expenses of the
students in your family (i.e., you, your spouse, or an eligible dependent) enrolled in eligible educational
institutions.
An eligible educational institution is a postsecondary educational institution (including many foreign
institutions) eligible to participate in a student aid program administered by the U.S. Department of
Education. You can find out whether the institution is eligible by calling
FAFSA
at 1-800-433-3243.
Tax problem
Tax problems can refer to any type of issues taxpayers are having with the IRS (federal) or state tax
authority. These problems may include garnishments, levies, liens, back taxes and interest owed. They arise
if the taxpayer hasn't filed a tax return, hasn't paid his business taxes, hasn't paid his
self-employment taxes, can't pay his Installment Agreements, etc.
Tax treaty
The United States has income tax treaties
with a number of foreign countries. Under these treaties,
residents (not necessarily citizens) of foreign countries are taxed at a reduced
rate, or are exempt from U.S. income taxes on certain items of income they
receive from sources within the United States. These reduced rates and
exemptions vary among countries and specific items of income.
United States person
The term United States person means (1) a citizen or resident
of the United States, (2) a domestic partnership, (3) a
domestic corporation, or (4) a domestic estate or trust.
Waiver of time requirements
You do not have to meet the minimum time requirements for
bona fide residence or physical presence if
you have to leave the foreign country because war, civil unrest, or similar
adverse conditions in the country prevented you from conducting normal business.
You must, however, be able to show that you reasonably could have expected to
meet the minimum time requirements if the adverse conditions had not occurred.
To even be considered for this waiver, your tax home must have been established
in the foreign country prior to the hostility or war. The request for waiver of
time requirements due to the adverse conditions is made via the IRS
form 2555
(Foreign earned income).
Worldwide income
Criterion for the income tax liability of a U.S. citizen or resident. The U.S. citizens or residents are
liable for income tax on their worldwide income, subject to double taxation relief.
