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In this post, we are going to cover a couple of the key documents U.S. expats need to look out for in order to properly file their 2022 tax returns. First we will cover your main compensation forms, second we will touch on additional information you will need to look out, and lastly we will talk foreign bank accounts and reporting.
Forms to look out for:
Employees
In the U.S. you will be sent W-2s with your wage and other compensation information. In the U.K. you will receive a P60 or a P45; and in Canada you’ll receive a T4. Each Country has its own respective forms.
Home Owners and Investors
If you had a mortgage during the year, you will also receive a 1098-INT which details the amount of interest you paid during the year. In the U.S. you will also get a 1099-B from your brokerage detailing your transactions for the year. You will need all this data to accurately file your tax returns.
Retired Individuals
If you are retired in another country, you’ll be required to report any distributions you received from retirement accounts including pensions, 401ks, annuities, profit sharing plans, and IRAs. Your broker should be sending you a statement if you drew from any of these accounts.
If you receive social security, the U.S. will send you a SSA-1099. If you are a nonresident alien and you received social security benefits last year, you will be sent a SSA-1042S instead. Other countries may not issue such forms so you may have to track this information down yourself.
Self-Employed Individuals
If you are self-employed then depending on your industry and business structure, you may receive a form 1099 from your customers. If not, the tracking and reporting burden is entirely on the taxpayer. Note you are allowed to offset all necessary business expenses including cost of goods sold, home office expenses, and business related equipment.
To help mitigate employment taxes for self-employed individuals working in certain foreign countries, the US entered into Totalization Agreements with nations to avoid double taxation of income with respect to employment taxes like Social Security and Medicare. To be able to claim the exemption, the taxpayer must include a statement (certificate of coverage from the social security agency in the country of foreign residence), which indicates that employment taxes are being paid in the country of foreign residence.
Additional information:
A couple additional things you are going to need include:
| Additional Information | Purpose |
| Prior Year Tax Return | Prior year return is always necessary to review year-over-year trends and to file the current year tax return. Some credits, like the Foreign Tax Credit, require information filed in the prior year. |
| Sales or Purchases of Real Estate (1099-S) | Generally you will get a form 1099-S when you sell a piece of real estate. However, in case you don’t, note that this information does have to be reported on your tax return. |
| Rental income documents and records | If you have rental property you should make sure to include all income and expenses related to such rental activities. Note, some of this information may be reported to the taxpayer on 1099-MISC. |
| Income from domestic partnerships or businesses | Typically if you invest in partnerships the business will send you tax reporting information in the form of a K-1. |
| Income from foreign partnerships or businesses | Typically if you invest in partnerships the business will send you tax reporting information in the form of a K-1 equivalent in that foreign country. Note, if you meet certain requirements, you may also have to file Form 8938 to satisfy FATCA reporting requirements. Note, the FATCA reporting requirements are in addition to the FBAR reporting requirements and are not meant as a replacement for one-another as reporting criteria is different. |
| Unemployment income | This typically is provided by the state in the U.S. However, other countries’ unemployment regimes may be different. Unemployment income is generally taxable income. In the U.S. unemployment income is provided on form 1099-G. |
| Foreign Housing Expenses | If your tax home is a foreign country, and you qualify for the Foreign Earned Income Exclusion, a further deduction from your gross income is available for housing expenses. |
| Childcare Expenses | These costs can be utilized to offset taxable income under the “Childcare and Dependent Care Tax Credits”. |
| Health insurance and medical expenses | Can be utilized on Schedule A to offset taxable income. Note expenses are subject to AGI limitations. |
| Charitable contributions | Can be utilized on Schedule A to offset taxable income. Note deduction amount is based on income and the type of contribution. |
| Travel Calendar, including dates in each country | This can help you qualify for the Foreign Earned Income Exclusion and other credits or deductions that limit your tax burden. |
Bank account information:
You will need to know the names and addresses of your relevant financial institutions in addition to:
- The bank account number,
- Highest account balance during the year,
- End of year balance, and
- Joint ownership or signature authority information
in order to comply with the FBAR reporting requirements. Note FBAR reporting is a disclosure statement that if not filed can result in large penalties. You typically have to file if you had $10k, in aggregate, in foreign bank accounts at any time during the year.
Closing Notes:
Now that you have a better idea of what to look for and what you need, the next step is to file your taxes. Note expat taxes are a little more tricky and can be subject to stiff penalties, so it’s always good to consult a CPA or other tax professional.