Contrary to popular belief, the U.S. tax filing obligation does not end when you move to a new country. The IRS taxes all Americans on their worldwide income, meaning your income in euros, yens, pounds, pesos, or whatever the currency your paycheck comes as all have to be reported on a tax return. Would there be an exception though? Kind of.
One of the very few legal ways you, as an American, wouldn’t file U.S. taxes is when your income does not surpass the standard deduction amount. American individuals who make a very moderate income would fall under the category. Generally, university and graduate school students with a small side income from their TA or RA position would assume this benefit. Take a look at the chart below as a guideline.
Tax Year 2018 Standard Deduction Table
|Filing Status||Standard Deduction|
|Head of Household||$18,000|
|Married Filing Separately||$24,000|
|Married Filing Jointly||$12,600|
If you are single and earned a combined income of less than $12,000 in 2018, your taxable income would be reduced to zero, lifting your federal or state tax obligation. In the States, still, a certain amount of income may be automatically withheld, but the entire amount would be refunded after filing a tax return. As an expat, without any withheld income to claim, there seems to be no apparent reason to file for a return.
But what if, what if there are benefits to consider for filing taxes even when you don’t have to? Bear with me here, and just take a look at these reasons to file. Would the positive outweigh the negative? Additionally, it is important to recognize that individuals considering “not filing” as an option would make for a very easy tax filing case. If something that could be done in less than an hour could provide so many benefits, the task, all of a sudden, looks less daunting.
Benefit #1. Don’t miss out on refund opportunities
Refundable earned-income tax credit or refundable child tax credit are some of the tax refunds you could receive, but no tax return means no refund.
Benefit #2. Lower the risk in case of an audit
The statue of limitations period for a tax audit is three years. That is if you file a return. Without filing a 2015 tax return, the statute of limitations increase to five years, giving the IRS more legal leverage to pry your personal tax situation by two more years for merely not filing a simple tax return.
Benefit #3. Capital loss? At least take what you can from it
If you had investment losses, the amount of losses can offset otherwise taxable capital gains next year. However, you must file a 2018 return to earn the credit from a tax-saving capital loss that will carry over to 2019.
Benefit #4. Business owner and suffered a loss?
The net operating loss (NOL) for 2018 from the business operations could be used to claim a refund- if you have suffered from a multiple years of losses, you would be able to claim as far back as 2016 tax year. How to find out if you are eligible? Well you have to first file for taxes.
Any of the listed items interest you? You can certainly look into likely possibilities and determine if filing a return would be worth your time and effort .