Form 1040 – U.S. Individual Income Tax Return
U.S. citizens and green card holders are required to file the IRS Form 1040 federal income tax return annually regardless of their country of residence and regardless of the source of their income.
The income items that may be required to be reported on your return therefore include, among other things:
- Wages from your foreign employer
- Self-employment income earned abroad
- Foreign dividends and interest income
- Rental income from foreign properties
- Foreign royalties
- Foreign capital gains or losses on stocks, bonds, real estate
- Foreign pension and social security benefits
- Exercise of certain stock options
If any of these items are not included, your under-reporting of income can lead to significant penalties if your return is audited by the IRS.
Tax Filing Status
Your federal income tax filing status affects the tax rate applicable to your income as well as the availability of deductions and credits to reduce your taxable income or offset your income tax. Taxpayers must use one of five filing statuses:
- Married Filing Jointly
- Qualifying Widow(er) with Dependent Child
- Head of Household
- Married Filing Separately
In the case of a U.S. tax resident that is married to a NRA, the default status of the U.S. resident filer is often married filing separately. Special rules and options are available for shifting one’s status to a more advantageous category. An expat tax professional should be consulted to ensure that the ideal status is utilized in this type of situation.
Federal Income Tax Rates
In general, the tax rate applicable to your income will depend on your tax filing status and your taxable income amount. Beneficial rates may apply to certain types of income, for example, capital gains and qualifying dividends. The Tax Cuts and Jobs Act of 2017 (the “Trump Tax Reform) reduced the federal income tax rates for the 2018 tax year (with the top rate, for example, being reduced from 39.6% to 37%). The IRS publication official announcing the new rates can be found here:
Filing Minimum Thresholds
In some cases, if your income is below a certain threshold amount, you may not be required to file a federal income tax return. The draft Form 1040 Instructions currently include a chart that lists the new minimum thresholds under the Trump Tax Reform.
|IF your filing status is. . .||AND at the end of 2018
you were. . .
|THEN file a return if your gross income was at least. . .|
|65 or older||$13,600|
|Head of household||under 65||$18,000|
|65 or older||$19,600|
|Married filing jointly||under 65 (both spouses)||$24,000|
|65 or older (one spouse)||$25,300|
|65 or older (both spouses)||$26,600|
|Married filing separately||any age||$5|
The IRS notes that if you qualify for a refundable credit (such as the earned income credit or the additional child tax credit), you should file a return to get a refund even if you are not otherwise required to file a return.
U.S. expats are generally required to file their returns by April 15th of the following year, just like U.S. residents. However, if you live outside the U.S. on April 15th, you are entitled to an automatic extension (without the filing of an extension form) until June 15th. It should be noted that if you owe tax, the extension applies only to the tax return filing and not the tax payment. Therefore, you must still submit your payment by April 15th to avoid paying interest on your late payment (late payment penalties do not commence until June 15th). An automatic extension can also be filed resulting in additional time to file until October 15th.