Expat couple filing taxes

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Topic Author
Plz
Posts: 99
Joined: Tue Oct 09, 2018 10:26 pm

Expat couple filing taxes

Post by Plz » Thu May 02, 2019 8:26 am

A US married couple works abroad. One person makes over $100k and thus does not qualify for the tax credit. The other makes under $100k and does. Let’s assume no other factors for taxes.

Does this situation work out so it’s as simple as paying taxes as if they were single?

paulsalem
Posts: 43
Joined: Mon Feb 06, 2017 12:26 pm

Re: Expat couple filing taxes

Post by paulsalem » Thu May 02, 2019 8:33 am

What tax credit?

The first $103,900 per person+ housing costs (up to the maximum for your location) is excluded, meaning you owe no taxes on it. Anything above that you can apply the Foreign tax credit to.

This is a super simple explanation and you need to either engage an expat tax prep firm or do a lot of reading.

jminv
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Joined: Tue Jan 02, 2018 10:58 pm

Re: Expat couple filing taxes

Post by jminv » Thu May 02, 2019 11:23 am

Plz wrote:
Thu May 02, 2019 8:26 am
A US married couple works abroad. One person makes over $100k and thus does not qualify for the tax credit. The other makes under $100k and does. Let’s assume no other factors for taxes.

Does this situation work out so it’s as simple as paying taxes as if they were single?
It’s not a tax credit and earning more than 100k doesn’t keep you from getting the first 103.9k of income excluded per qualified person. As the foreign earned income tax exclusion is per qualifying person, not couple, you should probably do married filing jointly. You can run both scenarios in TurboTax if you like. Remember that above the exclusion amount you get credit for taxes paid to the country where you’re resident.

It sounds like you need to hire someone for your taxes this first year to make sure you do it right, minimize any liability, and meet all the reporting requirements. Make sure you understand the physical presence test for the exclusion, too, so you don’t fall afoul of it. Future years, just use TurboTax.

Topic Author
Plz
Posts: 99
Joined: Tue Oct 09, 2018 10:26 pm

Re: Expat couple filing taxes

Post by Plz » Thu May 02, 2019 7:13 pm

jminv wrote:
Thu May 02, 2019 11:23 am
Plz wrote:
Thu May 02, 2019 8:26 am
A US married couple works abroad. One person makes over $100k and thus does not qualify for the tax credit. The other makes under $100k and does. Let’s assume no other factors for taxes.

Does this situation work out so it’s as simple as paying taxes as if they were single?
It’s not a tax credit and earning more than 100k doesn’t keep you from getting the first 103.9k of income excluded per qualified person. As the foreign earned income tax exclusion is per qualifying person, not couple, you should probably do married filing jointly. You can run both scenarios in TurboTax if you like. Remember that above the exclusion amount you get credit for taxes paid to the country where you’re resident.

It sounds like you need to hire someone for your taxes this first year to make sure you do it right, minimize any liability, and meet all the reporting requirements. Make sure you understand the physical presence test for the exclusion, too, so you don’t fall afoul of it. Future years, just use TurboTax.
Thanks. If you could please help a bit more, what are the pros and cons filing separately vs jointly?

typical.investor
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Joined: Mon Jun 11, 2018 3:17 am

Re: Expat couple filing taxes

Post by typical.investor » Fri May 03, 2019 5:30 am

Plz wrote:
Thu May 02, 2019 7:13 pm
jminv wrote:
Thu May 02, 2019 11:23 am
Plz wrote:
Thu May 02, 2019 8:26 am
A US married couple works abroad. One person makes over $100k and thus does not qualify for the tax credit. The other makes under $100k and does. Let’s assume no other factors for taxes.

Does this situation work out so it’s as simple as paying taxes as if they were single?
It’s not a tax credit and earning more than 100k doesn’t keep you from getting the first 103.9k of income excluded per qualified person. As the foreign earned income tax exclusion is per qualifying person, not couple, you should probably do married filing jointly. You can run both scenarios in TurboTax if you like. Remember that above the exclusion amount you get credit for taxes paid to the country where you’re resident.

It sounds like you need to hire someone for your taxes this first year to make sure you do it right, minimize any liability, and meet all the reporting requirements. Make sure you understand the physical presence test for the exclusion, too, so you don’t fall afoul of it. Future years, just use TurboTax.
Thanks. If you could please help a bit more, what are the pros and cons filing separately vs jointly?
I see no advantage for filing separately.

I recommend using Turbo Tax and trying both ways too. see https://turbotax.intuit.com/tax-tips/ma ... /L7gyjnqyM

Oh, they mention if one has large medical expenses, it might be better to do it separately.

crre
Posts: 40
Joined: Fri Apr 12, 2019 8:07 pm

Re: Expat couple filing taxes

Post by crre » Fri May 03, 2019 3:06 pm

see "Tax Guide for U.S. Citizens and Resident Aliens Abroad"

https://www.irs.gov/pub/irs-pdf/p54.pdf

Topic Author
Plz
Posts: 99
Joined: Tue Oct 09, 2018 10:26 pm

Re: Expat couple filing taxes

Post by Plz » Fri May 03, 2019 10:22 pm

Thanks all

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NotYourAverageJones
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Re: Expat couple filing taxes

Post by NotYourAverageJones » Sat May 04, 2019 9:10 am

FEIE for 2019 is 105,900 using Form 2555.
Additional housing exclusion depends on location. Each of you can qualify for it filing joint, as long as you both meet either Bona Fide Residence Test or Physical Presence Test. Both have different qualifiers (and many disqualifiers including cruise ship travel :( ) and depend on amount of time spent in/outside of the US in either calendar year for BRT or 12 month period for PPT.

We live in the Middle East. Been here 10 yrs. It's not something to mess with and expat returns are highly audited returns. Make sure to hire a company whose specialties are expat specific taxes. Forget the "do it yourself" route, skip HR Block or Turbo Tax etc. The financial risk is way too high, especially when talking about potential for 5 digit refunds at your incomes.

Bottom line: Pay the money to have E&Y (Ernst and Young) do it for you because its $ well spent! We use them and they are wonderful. They are a global company and they know their stuff. Plus having a company such as theirs sign your tax retun tends to get less push back from IRS for the above reason. Many fellow expat we know didn't take that route and used a friends recommendation for "some guy who knows expat stuff" and they are all being audited. No fun dealing with those stressors from overseas!

Good luck!

paulsalem
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Joined: Mon Feb 06, 2017 12:26 pm

Re: Expat couple filing taxes

Post by paulsalem » Sat May 04, 2019 9:18 am

I was pretty happy with TaxesForExpats. Probably a lot cheaper than E&Y. This isn't really a complex matter for someone who deals with it regularly.

German Expat
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Joined: Fri Oct 16, 2009 10:49 pm

Re: Expat couple filing taxes

Post by German Expat » Sat May 04, 2019 2:51 pm

Can't answer your question since we are above and use the foreign tax credit. We do get the US taxes done by a local company in Switzerland that specializes in US taxes. I would at least for the first year pay somebody and get your questions answered and then you can still look at the DIY route later on.
Also don't forget to file your Fbar (Fincen 114) if you had at any time during the year more then 10k in accounts outside the US. This is unrelated to form 8938 which needs to be filed with your taxes.

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NotYourAverageJones
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Re: Expat couple filing taxes

Post by NotYourAverageJones » Sun May 05, 2019 6:04 am

paulsalem wrote:
Sat May 04, 2019 9:18 am
I was pretty happy with TaxesForExpats. Probably a lot cheaper than E&Y. This isn't really a complex matter for someone who deals with it regularly.
I agree an expat can absolutely go that less costly route, especially when it's more of a vanilla expat return. We are tax equalized expats, so we have a more specific tax situation that REQUIRES us to use E&Y per our assignment contract. Regardless, we have never balked at investing in qualified advice. IMO it's money well spent to have a more seasoned company handle our tax stuff. But again, to each their own since it's entirely up each individuals level of comfort and comprehension of their own tax situation. Trust but verify and make sure to inquire about audit protection coverage. :beer

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