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Old 20.02.2011, 16:53
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FAQ: Expat's Guide to US Tax

As US tax season is rapidly approaching, I thought I would take a few moments to share with others on EF the single-best resource on US taxes for expats that I've come across: The Expat's Guide to US Taxes

I came across the guide last year as I prepared my US taxes, and it really is the first guide I've come across that is specifically geared towards Americans living overseas. Despite a long trawl through the tax books available on Amazon, nothing else even comes close.

This guide has information on who is required to file (and what to do if you should have been filing but didn't), how to handle foreign earned income, deductions, foreign tax credits and lots of other topics that are of interest to expats. Most helpfully, it includes samples of completed tax returns, which I found greatly clarified the guidance I'd seen elsewhere.

I learned more in two hours spent reading this than in weeks of what I'd gleaned from the IRS publications, chats with my tax accountant, and what I learned from US-focused tax guides.

Hope it's as helpful to others here as it was to me.
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Old 25.02.2011, 15:46
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Re: FAQ: Expat's Guide to US Tax

Hello,

This recommendation is fantastic. Many thanks since the tax issue is so unclear. It is greatly appreciated!

Ingrid
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Old 17.04.2011, 01:38
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Re: FAQ: Expat's Guide to US Tax

Thanks so much for this invaluable resource...it's making a tough decision clearer.

Best regards,

Marc
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Old 17.04.2011, 14:14
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Re: FAQ: Expat's Guide to US Tax

Strange... but the link doesn't work anymore. Anyone else having this problem too?
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Old 17.04.2011, 14:26
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Re: FAQ: Expat's Guide to US Tax

Tested link just now and it works for me!
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Old 25.04.2011, 17:45
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Re: FAQ: Expat's Guide to US Tax

This is GREAT! Answers a lot of questions I have and now I don't have to bother asking my accountant back at home. THANK YOU!!
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Old 27.09.2011, 20:16
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Re: FAQ: Expat's Guide to US Tax

...I am considering a job offer in Geneva, Switzerland. Being a US citizen I am worried about US taxation. What is the net impact here? Is it 100% certain I end up paying tax in both countries? If yes, is the impact material or not?
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Old 27.09.2011, 22:36
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Re: FAQ: Expat's Guide to US Tax

Yes, worry. Whether the impact is material or not depends on how much money you will be earning. Read the guide mentioned above to get a general understanding. We haven't had to do a year of taxes yet, but this is what I've figured out by reading (lots of great info on this site if you dig around a little).

  • Your first $91K earned abroad will not be taxed and you can claim a credit for foreign taxes paid on the rest (i.e. you will not be taxed double).
  • Housing in Geneva is outrageously expensive, but you will get a housing deduction specific to Geneva that may or may not make it worth it.
  • If you end up owing the IRS, it tends to be the difference between what you paid the Swiss government and what you would have paid the US government if you had lived there (i.e. being in a "low tax" country doesn't help you).
  • Your tax shelters are limited -- if you use the Swiss pension scheme ("pillars 2 and 3") to reduce your CH taxes, as the Swiss do, the US will tax the money you put in -- and then the Swiss will tax it when you take it out, resulting in double taxation of those CHF's. People in the financial world may have finagled some other way to shelter money (non-qualified deferred compensation plan in the States? I think there are some fancy and advantageous expat contracts out there, but we are local).
  • You can still take the US deductions that you always have -- charity, mortgage, self-employment expenses, etc.
  • Our tax advisor thought that it would "come out in the wash" based on the information we gave him.
  • Your decision has to be based on a lot more than $$$ or you may be very unhappy.
  • Whatever you do, don't post on EF "Can I survive in Geneva on 120,000 CHF/year".
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Old 28.09.2011, 02:05
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Re: FAQ: Expat's Guide to US Tax

In the end, it depends on how much money you make of course. I've done my taxes here the last three years and have found the exposure to US tax to be none or minimal. In fact, if you have paid AMT (alternative minimum tax) in the past, you might just get a refund of that. I have and I would have never gotten those refunds if I was still in the US.

From what I understand, you shouldn't be 'double' taxed (the US and Switzerland have a tax treaty to prevent this), but some claim there are situations where this can happen. I would think this is rare. Many people will tell you to definitely pay a professional to do your taxes, but at least in my case, the amount I would have to pay a professional to do my US taxes, would be quite a bit greater than the taxes themselves.

Generally I would say that the tax situation should not make any difference in your decision to take the job or not. Keep in mind, even if you have to pay US tax, you will most likely still be paying less overall tax than you would in the US. This situation doesn't happen in most European countries, as their taxes are higher than in the US and you get a credit against your potential US taxes. Switzerland happens to a be lower tax country, however.

Best of luck,
Dan
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Old 28.09.2011, 08:22
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Re: FAQ: Expat's Guide to US Tax

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In the end, it depends on how much money you make of course. I've done my taxes here the last three years and have found the exposure to US tax to be none or minimal. In fact, if you have paid AMT (alternative minimum tax) in the past, you might just get a refund of that. I have and I would have never gotten those refunds if I was still in the US.

From what I understand, you shouldn't be 'double' taxed (the US and Switzerland have a tax treaty to prevent this), but some claim there are situations where this can happen. I would think this is rare. Many people will tell you to definitely pay a professional to do your taxes, but at least in my case, the amount I would have to pay a professional to do my US taxes, would be quite a bit greater than the taxes themselves.

Generally I would say that the tax situation should not make any difference in your decision to take the job or not. Keep in mind, even if you have to pay US tax, you will most likely still be paying less overall tax than you would in the US. This situation doesn't happen in most European countries, as their taxes are higher than in the US and you get a credit against your potential US taxes. Switzerland happens to a be lower tax country, however.

Best of luck,
Dan
If you make more than the exemption and don't have deductions... then you're going to owe. That's my understanding anyway.
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Old 02.01.2012, 20:22
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Re: FAQ: Expat's Guide to US Tax

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In the end, it depends on how much money you make of course. I've done my taxes here the last three years and have found the exposure to US tax to be none or minimal. In fact, if you have paid AMT (alternative minimum tax) in the past, you might just get a refund of that. I have and I would have never gotten those refunds if I was still in the US.

From what I understand, you shouldn't be 'double' taxed (the US and Switzerland have a tax treaty to prevent this), but some claim there are situations where this can happen. I would think this is rare. Many people will tell you to definitely pay a professional to do your taxes, but at least in my case, the amount I would have to pay a professional to do my US taxes, would be quite a bit greater than the taxes themselves.

Generally I would say that the tax situation should not make any difference in your decision to take the job or not. Keep in mind, even if you have to pay US tax, you will most likely still be paying less overall tax than you would in the US. This situation doesn't happen in most European countries, as their taxes are higher than in the US and you get a credit against your potential US taxes. Switzerland happens to a be lower tax country, however.

Best of luck,
Dan
The situation has changed. Whereas you used to be taxed on the amount by which you exceeded the exemption, you now 'go to the head of the class' on the tax table, which puts you in a much higher tax bracket. I have paid several thousand dollars in US tax over the last few years, but previously went many years without having to pay anything extra.

The next hook is the foreign accounts. They are being unbelievably draconian with these accounts. You really need to be 100% truthful about every little account you own or they can actually confiscate the whole thing.
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Old 09.03.2015, 15:27
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Re: FAQ: Expat's Guide to US Tax

Hi!

This tax guide is so helpful, thank you!!

I am still trying to decipher if I can claim that I am a bonifide resident or not. If not, I will have to limit my time visiting the US this summer. Any advice would be greatly appreciated! Here is the basic situation:

These are my locations of work in 2014:

Jan 1-Apr 20 2014 Worked in Switzerand (seasonal job)
(then travelled in Europe x3 weeks)
May 25- Aug 7 Worked in USA
Aug 18-present (contract currently through June 2016 with view to extend)

When I file my 2014 US taxes, I cannot qualify as a bonfide resident, correct? Or can I claim my tax year from Aug 2014-Aug 2015?

(I know will qualify as bonafide resident for 2015 US taxes).

If I go for the physical presence test for my 2014 US taxes, can I count Aug 2014-Aug 2015 as my 12 consecutive months even though a majority of it is in 2015?

Any expertise would be very helpful! I would like to go home and visit family during summer break, but since I was home for Christmas (Dec 20, 2014-Jan 10, 2015), I am feeling like I need to limit my time visiting the US to only 14 more days this year (or at least until Aug)

Thank you in advance!
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Old 20.01.2012, 07:52
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Re: FAQ: Expat's Guide to US Tax

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  • Your tax shelters are limited -- if you use the Swiss pension scheme ("pillars 2 and 3") to reduce your CH taxes, as the Swiss do, the US will tax the money you put in -- and then the Swiss will tax it when you take it out, resulting in double taxation of those CHF's. People in the financial world may have finagled some other way to shelter money (non-qualified deferred compensation plan in the States? I think there are some fancy and advantageous expat contracts out there, but we are local).
Can you please explain how this works. My gross Swiss income is slightly under the FEIE limit. (not taking into account taxes, housing exemptions)

Say for example i earn 50,000 gross, I pay my contributions to AHV, PK, and the employer gives a matching portion of that as well into the system. Does that mean that my actual income in the eyes of the US is 50K+ whatever my employer contributions are?
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Old 20.01.2012, 09:59
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Re: FAQ: Expat's Guide to US Tax

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Can you please explain how this works. My gross Swiss income is slightly under the FEIE limit. (not taking into account taxes, housing exemptions)

Say for example i earn 50,000 gross, I pay my contributions to AHV, PK, and the employer gives a matching portion of that as well into the system. Does that mean that my actual income in the eyes of the US is 50K+ whatever my employer contributions are?
If you earn chf 50k gross or even up to whatever 90k usd is in chf (depending on exchange rates) and you don't have major income from investments you will not owe the US govt anything. You still need to file a return but can download turbotax and it's easy step by step.
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Old 20.01.2012, 10:57
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Re: FAQ: Expat's Guide to US Tax

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If you earn chf 50k gross or even up to whatever 90k usd is in chf (depending on exchange rates) and you don't have major income from investments you will not owe the US govt anything. You still need to file a return but can download turbotax and it's easy step by step.
So what happens if you are slightly under the tax threshold and your company's contribution to your AHV and Pensionskasse takes you over the threshold?
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Old 16.12.2013, 11:38
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Re: FAQ: Expat's Guide to US Tax

Sorry to drag up an old thread, but I could not find anywhere in the guide where it says Your first $91K earned abroad will not be taxed. Can anyone confirm this is true? Does this mean that I do not need to fill out tax forms until after I have earned 91,000?

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Yes, worry. Whether the impact is material or not depends on how much money you will be earning. Read the guide mentioned above to get a general understanding. We haven't had to do a year of taxes yet, but this is what I've figured out by reading (lots of great info on this site if you dig around a little).

  • Your first $91K earned abroad will not be taxed and you can claim a credit for foreign taxes paid on the rest (i.e. you will not be taxed double).
  • Housing in Geneva is outrageously expensive, but you will get a housing deduction specific to Geneva that may or may not make it worth it.
  • If you end up owing the IRS, it tends to be the difference between what you paid the Swiss government and what you would have paid the US government if you had lived there (i.e. being in a "low tax" country doesn't help you).
  • Your tax shelters are limited -- if you use the Swiss pension scheme ("pillars 2 and 3") to reduce your CH taxes, as the Swiss do, the US will tax the money you put in -- and then the Swiss will tax it when you take it out, resulting in double taxation of those CHF's. People in the financial world may have finagled some other way to shelter money (non-qualified deferred compensation plan in the States? I think there are some fancy and advantageous expat contracts out there, but we are local).
  • You can still take the US deductions that you always have -- charity, mortgage, self-employment expenses, etc.
  • Our tax advisor thought that it would "come out in the wash" based on the information we gave him.
  • Your decision has to be based on a lot more than $$$ or you may be very unhappy.
  • Whatever you do, don't post on EF "Can I survive in Geneva on 120,000 CHF/year".
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Old 16.12.2013, 11:44
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Re: FAQ: Expat's Guide to US Tax

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Sorry to drag up an old thread, but I could not find anywhere in the guide where it says Your first $91K earned abroad will not be taxed. Can anyone confirm this is true? Does this mean that I do not need to fill out tax forms until after I have earned 91,000?
You are referring to the Foreign Earned Income Exclusion, which is $97,600 for 2013. You can exclude this income, but you still need to file a tax return.

http://www.irs.gov/Individuals/Inter...come-Exclusion
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Old 16.12.2013, 12:08
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Re: FAQ: Expat's Guide to US Tax

Thanks for the link!

So basically every year, I fill out a tax return but never owe US taxes because I earn under the FEIE?

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You are referring to the Foreign Earned Income Exclusion, which is $97,600 for 2013. You can exclude this income, but you still need to file a tax return.

http://www.irs.gov/Individuals/Inter...come-Exclusion
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Old 28.09.2011, 19:36
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Re: FAQ: Expat's Guide to US Tax

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...I am considering a job offer in Geneva, Switzerland. Being a US citizen I am worried about US taxation. What is the net impact here? Is it 100% certain I end up paying tax in both countries? If yes, is the impact material or not?
As previously mentioned, if you earn more than the FEIE and have no exclusions you will end up paying your swiss taxes plus US taxes. Geneva is one of the highest taxing canton so the bite would not be as painful as if you were elsewhere in Switzerland but it can be substantial. It's difficult to give figures without knowing your situation but your US tax liability can go as high as several thousand USD...
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Old 28.09.2011, 19:56
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Re: FAQ: Expat's Guide to US Tax

To anyone who says that the difference in tax rates is not material, or may only be a 'few hundred' or 'few thousand' francs, it's worth remembering that there are a number of variables that contribute to how much you'll need to pay in US tax. This includes:

1) Whether you're under or over the FEIE limit
2) The tax rates in your canton
3) The size of your salary

If you're under the FEIE limit, it's pretty clear that you're not going to end up with an additional US tax liability.

But this is Switzerland, so it's dangerous to assume that everyone automatically earns CHF120'000 a year. Yes, if you're Mr. Average EFer, living in Baselstadt (with a relatively high tax rate) and earning CHF120'000 a year (just a smidge over the FEIE limit), you'll probably only have a small additional US tax liability.

But if you've taken a job as a Supply Chain director for a multinational who have based themselves in Zug for tax reasons, and you're on a salary of CHF250'000 with a further annual bonus of CHF100'000, a CHF50'000 relocation allowance and private school tuition for your 3 kids (not an entirely unlikely situation for some on here), you'll find that the combination of your salary (call it close to CHF500'000 when you factor in the benefits-in-kind) and the very low rates of personal tax in Canton Zug mean that you're likely to end up writing a pretty large check to Uncle Sam each year with quite a few zeros at the end.

This has two implications -- first, it means that you need to be aware of what your likely liability is going to be. Second, it means that you may make different choices than a Swiss person would: for example, it costs a fortune to live in Canton Zug. You might choose to forgo the tax benefit of living in Zug and move to a higher tax canton where rents are cheaper. For a Swiss person, this is a zero-sum game (the reduced rent is countered by higher taxes) but for a US person, who will end up paying the difference between their Swiss tax liability and their US tax liability, this will save money overall.

This is definitely a case of one-size-doesn't-fit-all. Do your sums, and particularly if you earn well above the FEIE limit, consider your tax position before making commitments.
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