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Democrats Abroad 2022 Tax Webinar

To view this presentation in PDF format, click here.

What’s New In 2022

US Tax Updates for Americans Abroad

Democrats Abroad 2022 Tax Webinar

March 9, 2022

Disclaimer!

Takeaway – this is general information and cannot be relied upon for your specific and unique situation.

Democrats Abroad cannot provide individual tax advice. Advice requires consideration of your individual circumstances and needs, none of which can be done on this webinar. We are not tax lawyers, accountants or advisers. Please consults a professional tax advisor/accountant/return preparer when addressing your personal tax matters.

Democrats Abroad does not endorse or recommend companies or individuals attending or hosting this webinar. The views expressed at this event are those of the respective individuals and companies, not Democrats Abroad. No liability is accepted by the Democrats Abroad for the opinions expressed, or for any errors or omissions expressed about matters of tax in any country, your financial planning or your legal obligations.

If you are in need of tax advice you can consult the American Citizens Abroad Tax Return Preparer Directory to find an advisor or tax return preparer near you. Buyers need always beware.

Agenda

Expat Tax Filing Basics

  1. Who needs to file?

  2. What has stayed the same?

  3. Overview of 2022 Updates

Who needs to file?

Federal Tax Return for 2021

Rules apply to:

  • US citizens

  • US Green Card holders

  • Accidental Americans

  • Substantial presence in the US

Who needs to file?

State Tax Returns for 2021

  • State filing requirements vary widely

  • Many states do not recognize Federal deadlines, credits, or even treaty provisions

  • Be extra careful when:

    • Moving in or out of a state

    • Keeping close ties to a state (maintain home, drivers license, voter registration)

    • Having income producing assets in a state (rental properties, businesses, etc)

Filing Beyond the 1040

Other Important Forms: Financial Assets & Informal Disclosures

  1. FBAR, FinCEN Report 114 - Separate from your Federal & State tax filing

    1. $10,000USD equivalent at any time during the tax year

    2. Due date coincides with Federal Tax return deadline (April 18th, June 15th, or extended deadline)

  2. FATCA (Form 8938): Part of Your Federal Tax Return

    1. Foreign account thresholds between $50,000-$200,000

  3. Foreign Corporate & Foreign Partnership Disclosure (Form 5471, Form 8865, Form 8858)

    1. Dependent on ownership structure & share

Important Dates (for 2021 tax filing in 2022)

Federal Deadlines for Americans Abroad

  • April 18th – US based taxpayer Federal tax & FBAR deadline

  • June 15th – Automatic Extension for Americans Abroad, Automatic FBAR Extension

  • Oct 17th – 1st Extension deadline for tax return & FBAR

  • Dec 15th – Additional expat extension

Foreign Earned Income Exclusion

Common Tax Benefits for American Expats

Foreign Earned Income Exclusion (FEIE) allows Americans overseas to claim $108,700 per person

How to qualify:

  • Physical Presence Test: 330 days abroad during any 365 day period

  • Bona Fide Residence Test: Abroad for at least 1 calendar year, pay taxes abroad

Foreign Tax Credit

Common Tax Benefits for American Expats

Foreign Tax Credit (FTC): allows Americans who pay foreign income taxes to claim non-refundable US tax credits

How to qualify:

  • Paid foreign income taxes on non-US source income

  • Paid foreign tax must be a TRUE income tax (not properly tax or other misc. taxes)

US Tax Compliance

What if I didn’t file a US return?

Streamline Foreign Offshore Procedure:

  1. Available to US taxpayers who had a qualified foreign residence in at least one of the filing years

  2. 3 tax returns

  3. 6 FBARs

  4. Certify that the filing was non-willful conduct

  5. Important: Disclose before the IRS contacts you

What’s New

For 2021 Tax Year (Filing in 2022)

  1. Standard deduction

  2. Updated tax brackets: ordinary & long-term

  3. 2021 Recovery Rebate Credit

  4. Advance Child Tax Credit

  5. What to expect when dealing with the IRS this season

Filing Thresholds

Federal Tax Return

US expats who meet certain thresholds must file US taxes & report foreign accounts, assets & businesses

2021 Filing Thresholds
Single: $12,550
Head of Household*: $18,800
Married Filing Jointly: $25,100
Married Filing Separately: $5 (yes, FIVE USD)
Self-employed: $400

*See IRS Publication 54, Tax Guide for US Citizens & Resident Aliens Abroad for more information

Ordinary Income: Tax Brackets

2021 Federal Rates (taxes due in 2022)

Tax Rate Single Married Filing Jointly (MFJ)
37% Above $523,600 Above $628,300
35% $209,426 to $523,600 $418,851 to $628,300
32% $164,926 to $209,425 $329,851 to $418,850
24% $86,276 to $164,925 $172,751 to $329,850
22% $40,526 to $86,375 $81,051 to $172,750
12% $9,951 to $40,525 $19,901 to $81,050
10% $0 to $9,950 $0 to $19,900

Long-Term Capital Gain: Tax Brackets

2021 Federal Rates (taxes due in 2022)

Tax Rate Single Married (MFJ)
0% Up to $40,400 Up to $80,800
15% $40,401 to $445,850 $80,801 to $501,600
20% Over $445,851 Over $501,601

Third Economic Impact Payment

Advance Payment of 2021 Recovery Rebate Credit

  • $1,400 for each eligible individual, including qualifying dependents

  • Adjusted gross income was not more than:

    • $150,000 Married Filing Jointly (phased out at $160,000)

    • $112,500 for Head of Household (phased out at $120,000)

    • $75,000 for Single (phased out at $80,000)

  • If you were eligible for the third payment and didn’t receive it, you MUST file a US tax return

Advance Child Tax Credit

New in 2021

  • Advance child tax credit was rolled out July 2021 with monthly payments

  • US taxpayers who spent more than 6 months outside of the US are not eligible

  • If you incorrectly received the payments, you MUST file a tax return to reconcile

  • You can opt out of the payments, log into the Child Tax Credit Portal on the IRS website

What’s New

Dealing with the IRS in 2022

  • IRS e-filing for the 2021 tax year opened on January 24, 2022

  • Electronic filing is more important than ever – the IRS 8+ months behind in processing paper returns

  • Only 11% of IRS calls were answered last year

  • File with direct deposit (if applicable) – don’t wait for a paper check

  • MUST file to claim a Recovery Rebate Credit or reconcile advance Child Tax Credit payments – even if you don’t meet the filing thresholds

Don’t Forget!

When you file your 2021 tax return

  • In 2021 you can claim a $300/$600 charitable deduction, even if you don’t itemize

  • If you contributed to your US retirement account, don’t forget to report it

    • Contributions can be made through April 18, 2022 for the 2021 tax year

  • Long onto bank, investment and other accounts to download tax information

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