1. Case Hypothesis
(1) This article takes the nationality of the Republic of China (Taiwan), the source of residence and income of the Republic of China, and the status of a U.S. citizen or permanent resident (green card) as an example.
(2) The days of residence outside the territory of the United States are more than 330 days a year.
2. Deadline for filing tax returns
(1) In principle, before 4/15, you can apply for an extension before 4/15, and the extension can be extended to 10/15.
(2) For those who live overseas, the tax return deadline is two months later than the average person, that is, before June 15.
(3) If you want to pay taxes, you must pay taxes before 4/15 and cannot be postponed.
3. Ways of tax declaration
(1) Paper declaration - download from the website of the Internal Revenue Service of the United States
(2) Intuit Turbo Tax: recommended by most people
(3) Taxslayer: Affordable price
(4) TaxAct, E-file.com, other software, Consulting Professional Accountant (CPA)
4. Tax form
(1) Form 1040 Personal Income Tax Return
Those who apply for personal AMT need to attach Form 6251.
(2) Form 2555 Foreign Labor Income Exclusion Discharge :
If you meet the requirements, you can enjoy the tax exemption, and the applicable standards are detailed below.
(3) Form 5471 Overseas Company Declaration Form
All U.S. tax filers who hold 10% or more of the equity of foreign companies overseas, or meet the reporting requirements of senior employees, must file Form 5471. This form and associated schedules are used to complete the reporting requirements of Sections 6038 and 6046 and their related regulations.
(4) Form 8938 Fat Coffee (FATCA) - Internal Revenue Service: (the amount is in US dollars)
If the specified foreign financial assets exceed the following thresholds, the taxpayer must declare Form 8938
The Internal Revenue Service classifies the declaration thresholds in the detailed rules. For those who have lived in the United States for a long time, 50,000 at the end of the year (75,000 in the middle of the year), and double for married couples. If you live in a foreign country for a long time, you can pay 200,000 yuan at the end of the year (300,000 yuan in the middle of the year) for one person, and the joint declaration of the husband and wife doubles.
Definition of overseas assets: financial accounts, stocks, funds, company equity (including partnership companies)
Financial instruments issued by overseas financial institutions, such as investment portfolios such as trusts and retirement accounts
(5) Fat Dad (FBAR)-FinCen114:
The declaration threshold is that the total amount of overseas accounts exceeds US$10,000, and it is submitted electronically to the Financial Crimes Enforcement Agency (FinCEN).
5. US income tax system
(1) What income needs to be declared
All income earned worldwide must be declared, such as: salary, business income, commissions, interest, dividends, partnership dividends, pension income.
(2) Tax-free quota
1. Standard deduction for tax filing status, assuming under 65 years old (2023 as an example) (USD)
Single: $13,850
Married filing jointly: $27,700
Married filing separately: $13,850
Head of household: $20,800
2. Foreign labor income credit
By filling out Form 2555, foreign labor income of up to $112,000 (2022) can be exempted, and $224,000 if the husband and wife file jointly, but passive income such as dividends, interest, and pensions cannot be deducted.
The three conditions (choose one) that meet the "foreign labor income credit" are:
(1) Must be earned income of the year
(2) The tax home must be in a foreign country
(3) You must meet the two tests of bona fide residence or physically present.
3. Foreign Tax Credit
The purpose is to reduce the occurrence of double taxation, which would otherwise occur where the foreign source of income is taxed simultaneously by the United States and the country of origin of the income. However, if the "foreign labor income credit" and "overseas housing exemption or deduction" have been used, the foreign taxes related to these two incomes can no longer be used as overseas tax deductions. To claim a foreign tax credit, you need to file Form 1116 (Foreign Tax Credit Form).
(3) Tax rate
The US personal income tax (Income Tax) tax rate is cumulative and divided into seven levels: 10%, 12%, 22%, 24%, 32%, 35% and 37%
Long-term capital gains and qualified dividends (Qualified Dividend): 0%~20%.
(4) Deadline for income tax recovery
1. If there is a declaration, it is 3 years after the tax declaration deadline.
2. If there is a declaration and the unreported balance exceeds US$5,000, it will be 6 years after the tax filing deadline.
3. Undeclared, no time limit for investigation.
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