The US tax deadline is approaching: The Local’s readers save 10% on this trusted software

Founding Father Benjamin Franklin was onto something when he wrote in 1789, ‘In this world, nothing is certain except death and taxes’. Well, one thing is for certain, the tax deadline of June 15th for US citizens abroad is fast approaching!

The US tax deadline is approaching: The Local's readers save 10% on this trusted software
Taxed by taxes? Nathalie Goldstein from MyExpatTaxes is here to answer your questions. Photo: Getty Images

The Internal Revenue Service does an extremely good job of making sure that Americans pay their taxes, including those living abroad.

Unlike some countries, the United States requires the vast majority of its citizens living abroad to file a tax return each year.

As complicated and time-consuming a process as completing a tax return can be normally, it can be even more complex and frustrating when foreign assets, property ownership and marital status enter the equation.

With the deadline for US citizens abroad approaching in mid-June, The Local asked Nathalie Goldstein, CEO of tax preparation software company MyExpatTaxes, some of the most common questions internationals have about their 2021 return.

Tax Basics

You will probably have filed a tax return before as a US citizen. However, you may be approaching your first tax deadline as a US citizen abroad. Here are a few things you need to know.

Who is obligated to file a US tax return?

“Americans and US Green Card holders whose income reaches the minimum income threshold regardless of where they live. This starts at $5 for those who are married to non US citizens and opt to file as Married Filing Separately.”

What are the likely consequences, should I miss filing a return?

“If you owe US taxes you will be charged penalties and interest on any unpaid amounts. Additionally the US could revoke your passport for failing to report your income if you owe more than $50,000 in unpaid taxes.”

Do I really get to file my tax return later than the April deadline as a US citizen living abroad? Do I need to request special permission for this extension?

“Yes. Anyone who is living outside the United States at the time of the tax deadline has until June 15th to file their tax return. You won’t need to request an extension but you will need to include a statement explaining why you qualify for the expat tax deadline. MyExpatTaxes automatically includes the statement when you file with us.

“However, if you will need to pay US taxes (which most Americans abroad won’t), you still need to pay by the April deadline.”

What are the types of documentation and records I should have ready when I start doing my taxes?

“You’ll need your income statements from the previous tax year (the one you are filing), as well as any deductions you plan to claim. You’ll also need your Social Security number, employer information, and your basic info such as birthdate and address.”

I am married to a non-US citizen. Do I file married – jointly or separately – or single?

“Most expats living in a foreign country will probably want to file as Married Filing Separately. Using this filing status keeps your spouse’s income out of the equation altogether.

“If you do file as Married Filing Separately, the minimum income threshold for filing a tax return is just $5. So make sure you file your return, even if you work just part-time or very minimally.”

How do I find the right exchange rates to use to convert my wages in my local currency to US dollars?

“The IRS posts the average annual exchange rates of several countries on their website. However, it’s not required to use these rates. If the rate is a publicly posted rate, simply select the rate which suits your specific situation the best.”


Overseas income and property

If you are living overseas as a US citizen, odds are that you earn a salary, or may even own property in your adopted country. This may have some impact on your tax return, depending on the nature of the income and property.

Am I supposed to pay any additional taxes to the US on my overseas income? What about retirement savings accounts and/or investment accounts where I currently live?

“Actually, it’s quite the opposite. You can use the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) to help you avoid paying any US taxes at all. The FEIE allows you to exclude around $100,000 of your foreign earned income (such as salary or self-employment income) from your tax return – meaning you won’t pay anything to the IRS for that income.

“Additionally, you may also get credit for any taxes paid to your resident country. This is why we say most Americans won’t pay US taxes – they just have to file! Of course if you don’t pay local taxes on passive income streams like investment accounts, then you might owe some tax to the US.”

Does owning property overseas have an impact on my US tax return? What should I know before buying, tax-wise?

“Owning property overseas is no different tax-wise than owning property in the US. When you rent or sell your property, you will need to report that income.

“For those selling property, if you qualify for it being your main home (you lived in and owned it for 2 of the last 5 years), you might be eligible to exclude up to $250,000 of the sale profit per taxpayer from your US tax return.”

Confused by what foreign income you need to declare on your US taxes? Receive a 10% discount at checkout with the discount code ‘TheLocal10’

Pandemic stimulus payments and taxes

Many US citizens were eligible for stimulus payments, released by the US government in response to the coronavirus pandemic that began in 2020. These may have some implications on the taxes you need to pay.

Will the pandemic and distribution of stimulus checks impact my tax return?

“There are a few ways the economic stimulus payments could affect your return:

  • If you didn’t file for the last few years, it’s not too late to claim your stimulus payments.
    – Assuming you owe less than the amount of the payments, you’ll receive any additional sum as a refund.
    – If you had a child in 2021 and get their SSN by October 15, 2022 (assuming you filed an extension), you can claim the latest $1,400 stimulus payment for them.
  • If you are a parent who received advanced child tax credit payments in 2021
    – If you, like me, use a US address when filing your taxes abroad, it’s possible you have received more in advance payments than you will qualify for. Since Americans abroad are only eligible for $1,400 per child (not the potential $3,600 that US residents can claim), if you received more than you were eligible for, you’ll need to pay this back when you file your taxes.
    – If you received the correct sum, or nothing at all, you will receive any remaining portion as a tax refund.”
No more taxing times – MyExpatTaxes makes filing easy. Photo: Getty Images

Reporting foreign accounts

US citizens are obliged under the law to declare assets in overseas accounts, over a set amount, in order to track funds and monitor and hinder tax avoidance. Come tax time, it’s important that you declare your accounts if they exceed the limit.

What is an FBAR and why is it necessary to file it?

“The FBAR or Report of Foreign Bank and Financial Accounts, is how the FinCEN (The Financial Crimes Enforcement Network) keeps tabs on US citizens who have money (and how much) in foreign accounts. Anyone who has more than $10,000 max combined in all their foreign financial accounts at any time throughout the tax year will need to file an FBAR.

“Things to note about the $10,000 limit: You need to add the sum of ALL of your foreign accounts. If the sum reached is over the limit, you need to file an FBAR.

“If your accounts are in a foreign currency, you’ll need to make sure you are converting the currency amounts to USD. MyExpatTaxes includes the FBAR for no additional charge – because we understand this is an essential form for expats like myself.”

Do joint accounts count towards the $10k combined total?

“Yes, you will need to include the entire sum of any account with your name on it or that you have signature authority over. For example, joint bank accounts, children’s accounts, and business accounts.”

When is the FBAR due? Do I need to request permission if I don’t send it in by the regular tax deadline in April?

“The FBAR is due April 15th. There is an automatic extension to October 15th. You don’t need to do anything to request the extension (except include a statement!)”

Do the FBAR and my income tax return need to be filed at the same time?

“It’s generally easiest to file them at the same time, but since your tax return is sent to the IRS and the FBAR is sent to FinCEN, you’re not required to complete them simultaneously.

“Again, this is where MyExpatTaxes can really help. Since your information is already in the software you just need to add the extra bits needed for the FBAR. We’ll send them both off to the right agencies for you!”

Seeking professional help

You can do your own taxes as a US citizen abroad, but there are some tools that can assist you.

What are the benefits of using a software program over using an accountant?

“I started MyExpatTaxes because of the frustration I felt with the accountant I used to help me with my expat taxes. At the time, there was no software offering a do-it-yourself solution that specifically addressed expat issues, such as the FBAR being automatically included or even the ability to e-file.

“Most tax software requires expats to print their return and mail it to Austin, Texas, which can be time consuming, costly, and hard to track. At MyExpatTaxes we can e-file 99% of tax returns, the majority of which are accepted by the IRS in a matter of hours, not days or weeks.

“Also, if you want to work with an accountant and have the speed and convenience of expat tax software, we offer both. You can opt to have a tax professional review your return at the end or have a video call with one immediately before you start. MyExpatTaxes offers you every filing experience you could want: do-it-all-yourself, do-some-of-it-yourself, or get-it-done-for-you.”

Take the stress out of filing your US tax return. Discover how MyExpatTaxes can make filing your return simple, no matter what your circumstances. Receive a 10% discount at checkout with code ‘TheLocal10’

Member comments

  1. For the first time I had to file my US return as an expat. I was very fortunate to find someone who is not only capable of preparing the US return, but also the French return as well. The returns were both filed on-time and were well prepared. The cost was in line with what I had paid when I lived in the US. There are good tax preparers out there and the cost can be reasonable — if you do your “homework” and provide clear information.

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EXPLAINED: The French ‘5-year-rule’ for inheritance tax

If you're researching French inheritance law or tax rules you might come across mention of the '5-year rule' - here's what this frequently misunderstood term refers to.

EXPLAINED: The French '5-year-rule' for inheritance tax

Estate planning is a generally complex topic, especially for foreign tax residents of France. 

French inheritance law has its own quirks – for example you cannot disinherit your children – and inheritance can be taxed at up to 60 percent. 

Death and taxes: What you need to know about estate planning in France

And if you’re a foreigner either living in France or with assets (such as property) in France, you’re likely to come across discussion of the ‘5-year rule’ or sometime the ‘6 years in 10 rule’. These are often misunderstood, so here’s a look at what they actually say and who they refer to.

What doesn’t the 5-year rule affect?

First let’s be clear on what we’re talking about – this is to do with inheritance tax, not inheritance law.

French inheritance law enforces the principle for forced heirship, which means that you cannot disinherit your children and must leave them a fixed portion of your estate.

For foreigners living in France, however, it is possible to have your will administered under the terms of your home country – which means that French inheritance rules would not apply. Find out more here

What does the 5-year rule affect?

What the length of your residency in France can affect is inheritance tax, and also the wealth tax – if applicable.

It’s a common misconception, but even if you have stipulated that your will is to be administered under the terms of your home country, that doesn’t mean that you will avoid French inheritance tax.

Inheritance tax is paid by the recipient of the inheritance and can apply if the recipient lives in France, or if the deceased lived in France or had French assets. The rate it is paid at varies depending on the relationship between the deceased and the heir, but it rises to 60 percent at the highest level. 

Reader question: Why pays French inheritance tax?

Before reading on, you will need to determine if you are a tax resident of France. To do so, you can consult The Local’s guide for tax residency. 

French residency

When you become a French resident, several tax obligations will automatically apply to you, such as having to fill out a yearly tax declaration (and if you’re American you will also need to report to the taxman any trusts that you are listed in, whether you are the beneficiary, grantor or trustee. You will not be taxed until distribution, but failing to report a trust can lead to steep financial penalties of up to €20,000).

READ MORE: What Americans in France need to know about trusts

If you die as a French tax resident, then the general rule is that the French taxman can consider your global assets for taxation purposes – so that would include assets in France as well as other assets eg property or shares in the UK or the US. 

This happens even if you noted in your will that you wanted it to be treated under the laws of your home country.

Practically speaking, this means that your heirs would be required to pay French taxes – you can learn more about what to expect from our estate planning guide.

If your country has a tax treaty with France, it is possible that tax credits to avoid dual taxation might be available. In order to find out more, you should consult assistance from a cross-border tax specialist.

In the majority of cases, if you are a French tax resident, then France will consider your global assets for inheritance tax upon your death. 

READ MORE: Reader question: Who is responsible for paying French inheritance tax?

Five years residency in France

There is however, one small exception to this – the 5-year rule.

The first thing to note is that it specifically applies to Americans – this is because of the France-US tax treaty which takes into account the fact that the US practices citizen-based taxation (rather than residency-based taxation as is more common).

If the 5-year rule applies, it means that only your French assets would be subject to French inheritance taxes, while cash, property, shares or other assets held in the US would be taxed there.

Be aware, however, that the 5-year rule does not apply to all Americans. 

According to tax attorney Jérôme Assouline, who is admitted to the bar in both Paris and New York (and based in Paris) only in very specific cases can certain people maintain their fiscal domicile in the United States rather than France. This is outlined in Article 4 section 3 of the US-France estate tax treaty.

This applies to those who “can prove they are only temporarily in France,” according to Assouline. 

In most cases, it is applied to posted workers and their spouses, as they would be in France for a fixed period of time and would have the intention of returning to the United States. 

It can only be applied if the person in question was living in France “less than five years during the 7-year period ending with the year of his death,” the treaty states.

Wealth tax 

There is one other reason you might hear about a ‘five-year rule’ – and that is in relation to the wealth tax (IFI), which can be applied to people with total assets worth more than €1.3 million. 

For the first five years of residency in France, the wealth tax considers only assets based in France, not abroad. However, once you enter six years of residency in France then your global assets will be considered. This means, for example, if you own a home in London or New York, as well as in Paris, you might find yourself hitting the threshold of assets above €1.3 million. 

The wealth tax might become relevant to you if you have been resident in France for over five years and you inherit a family home or another property outside of the country. 

Once you have a high enough net worth to be considered for the wealth tax, you should consult the tax treaty in place between your home country and France to determine if any tax credits would be available. For Americans, as there is no wealth tax equivalent in the US, the French-US tax treaty does not offer tax credits to avoid double taxation.

Six out of 10 years

The other rule you might hear about is the ‘6 years in 10’ rule – and this has to do with beneficiaries of a gift or inheritance from outside of France.

If you have been a tax resident of France for six out of the last 10 years, then you will likely have to declare any foreign inheritance you receive – for example if a relative in the UK dies and leaves you a UK property. 

According to French tax authorities, anyone who is a French resident and has been one for six out of the last 10 years is liable to French tax on both “movable and immovable property located in France and outside of France that they inherit.”

This includes “public funds, interest shares, assets or rights forming part of a trust, debts and generally all French or foreign securities of any kind.”

As such, after six years of living in France, assuming you have reached the threshold for the size of the inheritance – which is over €50,000 for direct heirs or the surviving spouse/ civil partner, or over €3,000 for other heirs – then you must declare the inheritance to French tax authorities.

Depending on whether your home country has a tax treaty with France, you may be able to qualify for tax credits. For example, if you are an American receiving an inheritance from a parent in the United States, then the US assets are taxable in France, but France will provide a deemed tax credit to avoid double taxation.