Do I have to file a US tax return while working overseas?
Yes for mostly cases. US citizens and US permanent residents (Green card holders) living abroad are required to file US Federal and States Individual Tax Returns on global inocme as the tax filing requirements are basically the same as if they lived in the US. Foreign Earned Income Exclusion, Foreign Housing Exclusion and Foreign Tax Credit
To reduce the possibility of being double taxed on the same income, the IRS allows qualified taxpayer to claim Foreign Earned Income and Foreign Housing Exclusions and a credit for foreign tax paid on foreign source income.
A qualifying taxpayer may elect to exclude up to USD 103,900 of foreign earned income for 2018 and up to USD 63,876 of foreign housing exclusion in Singapore for 2018. The exclusion amount is indexed for inflation every year.
In addition, part of the foreign tax could be claimed as Foreign Tax Credit. Foreign tax would be scaled back (disallowed) as credit to the extent that the tax related to earned income excluded under the Foreign Exclusions.
What is Report of Foreign Bank and Financial Accounts (FBAR)?
United States persons are required to file an FBAR if:
1. the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
United States person includes U.S. citizens; U.S. residents; entities, including but not limited to, corporations, partnerships, or limited liability companies, created or organized in the United States or under the laws of the United States; and trusts or estates formed under the laws of the United States.
Those required to file an FBAR that fail to properly file a complete and correct FBAR may be subject to civil monetary penalties.
For penalties that are assessed after August 1, 2016, the IRS may assess an inflation-adjusted civil penalty not to exceed $12,459 per violation for non-willful violations that are not due to reasonable cause.
For willful violations, the inflation-adjusted penalty may be the greater of $124,588 or 50 percent of the balance in the account at the time of the violation, for each violation.
What is Form 8938 Statement of Specified Foreign Financial Assets?
Specified individuals who have an interest in specified foreign financial assets (such as value of specified foreign financial assets, which include financial accounts with foreign financial institutions and certain other foreign non-account investment assets) and meet the reporting threshold are required to file Form 8938.
Specified individuals living in the US:
– Unmarried individual (or married filing separately): Total value of assets was more than $50,000 on the last day of the tax year, or more than $75,000 at any time during the year.
– Married individual filing jointly: Total value of assets was more than $100,000 on the last day of the tax year, or more than $150,000 at any time during the year Specified individuals living outside the US:
– Unmarried individual (or married filing separately): Total value of assets was more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.
– Married individual filing jointly: Total value of assets was more than $400,000 on the last day of the tax year, or more than $600,000 at any time during the year.
Penalty of up to $10,000 for failure to disclose and an additional $10,000 for each 30 days of non-filing after IRS notice of a failure to disclose, for a potential maximum penalty of $60,000; criminal penalties may also apply