Expat Americans unhappy over filing US tax returns

Published:  16 Nov at 6 PM
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A recent survey has revealed that expat Americans living abroad are increasingly reluctant to file their US tax returns.

The study, undertaken by US expat tax reporting, filing and planning service for expats Greenback Expat Tax Services, speaks volumes about expat concerns over their tax liabilities. According to Greenback president David McKeegan, the majority of expats living and working overseas feel they are unfairly treated by the US government.

McKeegan adds that, with the upcoming 2013 increases in Medicare, Medicaid, income tax and capital gains tax, even more expats are joining in the call for fair representation. Medicare and Medicaid contributions are due to increase by 3.8 per cent and 2.9 per cent respectively, impacting self-employed expats, and capital gain tax is expected to leap from 15 per cent to 20 per cent.

However, McKeegan states that, despite the proposed increases, there are ways to minimize the pain such as the Foreign Earned Income Exclusion and the special credits and deductions applicable under certain circumstances. For example, the Foreign Earned Income Exclusion was introduced to allow expats to avoid dual taxation, and includes a set of special qualifiers which allow migrants to avoid taxes on both countries.

Earning foreign income, establishing the foreign country as the expat’s tax home, or passing the IRS’s Bona Fide Residence test are three such, with an AMT patch and certain tax positions due to expire at the end of 2012 other options. Lastly, according to McKeegan, gift and estate taxes are an important area to consider.
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