Tax for expats in America in 2023

Tax is something that you need to take very seriously, and you have obligations that extend beyond what is in the US and what is in Australia (basically, you need to combine them).

Seeking professional advice, therefore, is potentially your best way forward. I have listed some accountants who have been passed through to me below, and if you have more, please do let me know!

One thing to note early is that Australian and US tax years operate on different cycles. Australia has a June 30 year-end, while the US has a December 31 year-end.

2023 Expat Tax Webinar

All the answers to your questions about tax and accounting for those living in the United States from Australia.

Join our virtual event where Jason Stoch, Managing Director of UpTrend Advisory will answer common tax and accounting questions about what’s required when you move to the US, and your ongoing requirements while in the US.

, Tax for expats in America in 2023

Payroll Tax explained in America

Federal income tax, Federal Social Security and Medicare tax, State income tax, and City income tax are withheld every pay-check.

Your employer approximates how much tax you will owe at the “end of the year” (the 15th of April or the next business day following it if the 15th is a weekend or holiday). They do this by pro-rating (working backward for how much time you’ve been working) your salary on a yearly basis to determine which income tax bracket you will fall in and remits this amount to the various levels of government who receive your payroll tax (e.g. City, State, and Federal).

In January and early February, you start receiving forms from your employer, a health insurance company, bank, share broker, and any other entity that gave you money over the past year. Keep these handy. You’ll need them when you File Your Tax Return.

Pro note: In some situations, such as receiving restricted stock units, your employer may apply a flat withholding rate instead of approximating which may lead to a tax bill at the end of the year due to under-withholding.

How do you file your tax in America as an expat?

As a newcomer to the U.S. (for at least the first year and first filing), you should always, for simplicity, safety and peace of mind, use a proper accounting or tax firm. This applies too if you are in a situation that is more complicated than simply working one job (e.g. with assets or international considerations).

After a year, most Americans use Turbo Tax, an online system like Etax in Australia (though privately run, so there’s possibly a fee!). It’s pretty easy and cost-effective and it also helps you understand what’s driving your US tax. A “tax preparer” can help you get everything in a line if you need some help.

It is worth pointing out that deductions are quite complicated in the US – but most taxpayers who don’t have mortgages use a standardized deduction, which means you do not get a tax deduction on your accountant fees. So don’t mentally deduct 40% when considering the cost!

I’ve put together everything you need to know in a range of videos with tax professional, Jason Stoch at UpTrend Advisory!

Topics we’ve covered about expat tax

Welcome to Tax Tips for Expats in the US

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Hi everyone, I’m America Josh, and I’m sitting here with Jason Stoch from uptrend advisory. Hello Jason! How are you?

Jason Stoch: Hey Josh, thanks for having me! I’m doing great. Thank you really excited to be here. I love our chats and love diving into what we’re about to dive into. 

America Josh: Thanks, baby. We’ve got some exciting stuff for all of you, and we love sitting here. Jason and I love answering your questions. We’ve had lots of questions sent in over the past few weeks, and past few years, we’ve done this for a few years now. And the idea is that we’ve tried to start off with a real thirty thousand even forty thousand foot view and then ask some of the more nitty-gritty questions. So some of these are going to apply to everyone. Some of them are going to apply to no one, but Jason is going to tell you that you always need to speak to a tax professional if things get a little bit hairy. 

Jason Stoch: Yeah, its tax isn’t hard once you know what you’re doing, but it is a journey to get there. So please make sure you take in these videos and take in the knowledge, and you know, reach out to josh reach out to me if you want to chat more about your specific situation. It’s not a one-size-fits-all. This is just meant to be, you know, the start of your journey understanding how the US tax system works and how it applies to your situation specifically. 

America Josh: I want to clarify, though, for a second, Jason, you just mentioned that you should speak to josh about taxes. Don’t talk to me about taxes. You can send your questions to me, but I’m going to forward them straight to Jason because it’s really important to know that having professionals like Jason and like all the professionals I chat to, they’ve spent years honing these skills and especially when it comes to tax and accounting. The amount of stuff that you don’t know you don’t know is immense. And unlike most things where you’ve got a problem, and you want to solve that problem with a lot of what Jason and other tax professionals will help you with is explaining to you that there are hundreds of forms for the IRS that you’ve never heard of that. Some of them are crucially important to your particular tax situation.

So speak to professionals if you’ve got more than just a single income and you’re filing, and you have no properties or investments anywhere in the world. It’s fine to think about doing it yourself. And we’ll talk about that in these videos but if you’ve got any investments, if you’ve got more than one income if you’ve got a family, spend the time, spend the money you know I do know that it costs money and a lot of people are looking to avoid costs at every turn which I do completely understand. But this is one that you shouldn’t sacrifice. Get this right because if the IRS finds that you’re doing something wrong. They just achieve that they’re not very friendly when it comes to trying to fix mistakes on your own.

So follow us we’re going to release these videos over the coming few days, and they’ll stay up forever as a resource, so if you’ve got questions for tax, leave them in the comments below. We’re always happy to check on those and keep making these videos because if they’re going to help you know. We want to be able to help you out with these tax questions because we know that it can get really confusing, especially in this January to April time of year where everyone’s talking about taxes. So tune in and leave your comments, and we really appreciate you coming along for the tax adventure.

America Josh: Thanks Jason!

Jason Stoch: Thanks Josh!  

When is tax time in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: When is tax time in the US like what time of year, and when am I meant to file?

Jason Stoch: Yeah! So the tax years are calendar years, so January through December, and tax season is always January through April 15 of the following year. That’s the tax season.

America Josh: So tax season means that I pay like they’re absolutely due at the end of tax season, and most people are sort of preparing all the documents and getting it all ready during that season?

Jason Stoch: Yes! So April 15 is the deadline for you to pay whatever you owe and lodge your return. So during that January through April window, you’re collating your documents and working with your accountant or filing on your own.

America Josh: Awesome! So should I be holding all my documents until April 15 and then going and looking, or really should I have done everything, you know December, January preparing everything, and then by the time April comes around, you’ve already sorted?

Jason Stoch: Yeah! I would suggest getting it done sooner rather than later just that you don’t have the stress of rushing at the 11th hour and potentially forgetting some things in your return that may lead to mistakes.

How do you file your taxes as an ex-pat in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: If I do want to file my taxes on my own, is that something that I can do online is or is some system, or do I have to file everything in letters and paper?

Jason Stoch: Yeah! So you can choose. It would probably be better to file online so that it’s securely transmitted to the US government as opposed to paper things that can get lost in the mail. If you are filing online, the IRS does have a free file solution if you’re earning a lower salary. But other than that, you can use another, you know, online software that you can find very easily through Google; an example would be TurboTax.

America Josh: Okay, so the turbo tax they are legitimate. They’re a way to file taxes if that’s sort of if you are a simple tax filing that doesn’t have too many nuances and you don’t need to speak to an expert that is an option for you.

Jason Stoch: Yes, but be mindful that it is just a data entry software, so it relies on you knowing what you have to do. It won’t tell you what you have to do.

America Josh: Awesome! So really, the difference between filing yourself and using those turbo tax things, as you just said it will give you the opportunity to tell them absolutely everything about a tax return that somebody would need to file, but they’d have to know exactly which lines go. You know which lines have to be input which lines, and what numbers have to be input into what spaces.

Jason Stoch: Exactly, yeah!

What is a W2 form?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Jason, what is a w-2 form?

Jason Stoch: A w-2 form is the US payment summary that you as an employer as an employee get annually that shows what has been paid to you on the last prior calendar year, as well as what taxes and payroll taxes have been withheld from your wages that year and that is the main roll-up summary document you use to prepare your return along with other things.

America Josh: Cool, so hold on, it’s not even a form like you don’t fill it in it’s something that you get it’s just called a w-2?

Jason Stoch: Yes, you will receive this form from your employer by January 31st each following year.

America Josh: Okay, cool, so yeah, it sounds like a form that I should be filling in, but it’s not. It’s just something that I receive, and I’ll have a copy that I’ll need to file my taxes. Got it!

How do you calculate your tax residency?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Is there an easy way to work out if I’m a resident for tax purposes?

Jason Stoch: Yes, the first thing is always to work out what visa you’re on, which you should know because that’s the one that will first tell you is my visa subject to the substantial presence test, which is the main driver of tax residency in the US if it isn’t such as a j1 where you get a period of time you’re exempt you would then be a non-resident but if you’re on something like a green card it doesn’t matter how many days you spend in the US you are a resident. Whereas the normal visas like an e3, you do need to do that test which is how many days you’re physically in the US in a calendar year. If that number is above 183, yes, if not no, but there are look back rules as well. Yeah, it just depends

America Josh: Yeah, no cool, so it’s basically the substantial presence test and what type of v’s you’re on they’re the two things that you need to know to work out your residency

Jason Stoch: Yes!

America Josh: Cool!

Is expat tax easy in the US?  

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Are international tax obligations easy?

Jason Stoch: No, and that’s coming from, you know, the accountants. It’s essentially can be a very complicated puzzle depending on the individual situation, whether it’s properties, companies, trusts, assets. It all triggers a unique type of form that the IRS has, and the IRS loves tax forms, so there are hundreds and hundreds of forms. And it’s something that you really should if these things apply to you. Use a professional unless you know what you’re doing because the IRS, if you don’t do certain forms, certain forms carries penalties for not doing them. So it’s just one of these things where if you do have international things, you want to make sure your bases are covered.

What happens if you accidentally file taxes late in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: If I do file late, so one of the common things that you mentioned that happens when people mistakenly file is that they fall late. Do i is there anything I can do? Do I, or you know at that point I have to come and see someone like yourself?

Jason Stoch: Yeah, so if you file late, you might get a failure to file a penalty from the IRS, which is a few hundred dollars and if you do owe some money as a result of it because the deadline has passed. They may charge you some interest on whatever amount was owing by the number of days you are late in filing. You can, you know, use a professional like us to help file and then potentially try and get some of these penalties waived.

What should I do if I forget to include something in my tax return?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: If I’ve forgotten to include something. So let’s say I’ve found a foreign bank account that I forgot to mention or something that I’ve left off my tax. What do I do?

Jason Stoch: So it depends on what was left off. If it is basic things, then yes, you can amend via normal means with an accountant, but in certain situations, depending on what’s been left off, you might want to look at some of the amnesty programs that the IRS has because there are certain forms where if you miss them or don’t complete them properly that have quite punitive fines. Where simply amending them doesn’t guarantee you won’t get fined. Whereas if you go through these amnesty programs, you have a layer of protection that will hopefully shield you from these penalties and fines. So long as the mistake wasn’t, you know, willful.

America Josh: Got it! So if you’ve genuinely made a mistake and you’ve been filing, and this counts for your FBAR, and I want to ask you about that it counts for FBAR and your taxes, it’s always worth being, as you said, proactive about making a change. So to break it down, there’s the tax which you can potentially go back to an accountant or a professional and have that repaired. What about the FBAR if I’ve made a mistake on one of my f bars, or I’ve left something off?

Jason Stoch: Yeah, so in FBAR, that’s something you can amend as well, same the FBAR has a statute of limitations of six years, unlike your tax return that has three. So you can either amend your FBAR yourself or use an accountant. It’s easy enough to do yourself but again, depending on what was left off, and things like that might be something you want to use an accountant for.

America Josh: Got it! But again, it can be something that’s amended, and the best thing you can do is to tell someone to tell a professional and get it fixed. Don’t wait for the IRS to find out because that will hurt.

Jason Stoch: Exactly yes!

Is tax residency and immigration residency the same thing?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Is tax residency and immigration residency the same thing?

Jason Stoch: No!

What to do if you make mistakes on your tax return?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh:  If I’ve made a mistake on one of my filings, is that gone? Is it gone forever, and that’s just my fault, or is it something I can do?

Jason Stoch: So it depends on the mistake, but generally, with the tax return, there’s a statute of limitations of three years from the deadline or when you filed the later of the two, which you can amend your return. So there is time for you to adjust your return if you need to.

America Josh: Okay! So if you’ve made a mistake, don’t ignore it. Go speak to someone like yourself or do something proactive about fixing it because there is time to recover if it’s something that you’ve noticed you know relatively soon after filing?

Jason Stoch: Yes! It’s always better for you to be on m the front foot than for the IRS to discover the mistake and then come to you.

America Josh:  Got it!

What’s the deal with FICA and Medicare and other items on payslips?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: under the state, local and federal taxes that I find on my payslips, I see FICA and Medicare and retirement, oh like all sorts of other listed items, are they all essential for visa holders?

Jason Stoch: Yes, so for most visa holders, all of these things are going to be withheld from your payslip just as they would from a US citizen. They’re essentially contributing to the social security system that you can access at retirement age with pensions and things like that. But there are some visa holders that are exempt from contributing to that, such as a j1.

America Josh: Okay! So it’s pretty selective to those who don’t have to pay it as a general rule most do, but there are particular reasons that some people don’t have to?

Jason Stoch: Yes, correct!

Introduction to Australian superannuation and taxation in the US

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Jason, do I have to pay tax or tell the US government about my superannuation?

Jason Stoch: So it depends because it depends on what kind of super funds you have. It depends on your contributions if you’re withdrawing and things like that. It’s a very gray field because it is not included in the tax treaty, similar to how the US 401k is not an attacks treaty. So definitely talk to someone like me to see how you’re super would be treated.

Tax residency and immigration residency explained?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Is tax residency and immigration residency the same thing?

Jason Stoch: No! The reason why is because you can be a tax resident and a non-resident alien at the same time. They’re two completely things that are almost indifferent buckets. One does not mean something for the other there are only certain times when they do mean the same thing, and that is, you know when you have a green card, you’re a residence, and you’re a tax resident.

America Josh: All right! So they kind of overlap. They’re like one big Venn diagram of residency, but they do not mean the exact same thing, and there will be differences for every individual at different times of their time in the US?

Jason Stoch: Yes!

Do I need a tax professional to file my US taxes?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Jason, I know that you’re an expert, and I know that you’re a tax professional but is the tax in the US something that I can do on my own as an ex-pat, or should I always be using an expert like yourself?

Jason Stoch: So I’m gonna throw up this one because everyone’s situation’s different, so if you have a very simplistic situation in the US where it’s just employment income, you don’t have anything going on in Australia by way of assets or income streams then yeah probably you can, but if you do have things in both countries it’s really up to you to make sure you learn everything about the US tax law and Australian tax law, so you are covering all your bases. If you’re not prepared to do that, then you probably should use a professional like me. Otherwise, it can lead to unnecessary mistakes.

What is a 1099 form in US tax?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Jason, what is a 1099 form or a 1099 form?

Jason Stoch: Yeah! So a 1099 form is a form that you receive not related to employment income. So it can be from various different institutions such as your bank saying we paid you this much interest income for the year, could be from your stock brokerage accounts saying you made this much in dividends interest capital gains this year, could even be from the government saying you receive this much unemployment income this year. And they just serve as an additional input into your tax return.

America Josh: Awesome! so basically, you’ve got your w-2 which is the core part of your like income earned income, and 1099’s that are all the bits around that any money that you’ve gotten in the US any money you’ve gotten over the course of the year?

Jason Stoch: Yeah! All your supplemental kinds of passive income streams.

America Josh: Got it!

Is a mistake on your tax return the end of the world?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: If I’ve made a mistake on one of my tax filings, are there paths for me to take?

Jason Stoch: Yes!

What is the W8 form?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What’s a w8 or then there’s like w8 ben and then there’s like w9s. Do you mind just a snapshot of what are these forms?

Jason Stoch: Yeah! These forms are a way to instruct the person requesting them of your tax residency. So if you’re a non-resident for tax purposes, you’re going to be completing the w8 or w8 ben form, which instructs the person that hey this person’s a non-resident. Or, if you are a resident, you’re going to give them the w9 form to instruct them that way. And the main purpose of this is that when you’re a non-resident, they may have to withhold some tax from you, but if you’re a resident, they don’t, but it’s something they need to know.

America Josh: Got it! So it’s effectively them asking you, yeah? Tell us your position we’re not asking for any sort of super-secret of information. It’s basically just like we need to understand whether you’re a resident of the US or not?

Jason Stoch: Correct, yeah! And you’re not locked into it. You could be a non-resident one year, and then you flip to a resident the next year and vice versa. Your residency can change based on your visa.

America Josh:  Okay, cool! So you’re filing if you get asked by a bank, so it’s completely fine if a bank sends you it’s not sort of a warning you know from anyone, and it’s completely fine to answer it as at the time that you sign it, it’s true and accurate to what you are doing even if next week you’re, you become a resident or your residency changes that’s completely fine you just need to fill it in and send it back to the bank or other financial institutions that sent it to you?

Jason Stoch: Yeah! You just need to update them when your residency changes, but otherwise, it’s just a basic form.

America Josh:  Awesome!

What are the most common mistakes ex-pats make at tax time in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What are some of the normal mistakes you see when people file either themselves or just in general? What are some of the mistakes that you see for tax filing in the US?

Jason Stoch: Yeah! So the typical mistakes are, you know, filing late um ignoring you know the mistakes that you realize you made on your returns and still filing anyway um not responding to letters from the IRS which is never good, not filing correctly you know as an example filing as a resident when you’re a non-residence or the opposite not remembering to include everything that you have or filing. Then you suddenly get another form delivered to you that was late. And then now your return is incorrect, seeing you know a professional that doesn’t understand. International tax is always a mistake because it becomes a situation of the blinds leading the blind, which is never great, or also just not using a professional when it gets really complicated.

Does Australian Superannuation have to be declared in US tax returns? It’s confusing…

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Jason, I’ve asked different accountants, and they’ve all given me different answers on super and whether it has to be paid or declared in the US and what exactly is included and isn’t? Am I right in saying that there is not a definitive right or wrong answer; it’s just murky?

Jason Stoch: Yes! It’s absolutely murky, and that’s where it really comes to what you want to do as an individual. There are firms who do have views that are favorable but more risky. And there are some ones that don’t understand this that are typically American firms. So going with an expat-focused firm who does understand super would probably be the safest bet for you.

America Josh:  Okay! Good to know because I know that we get a lot of people saying, you know, I’ve heard that it absolutely has to be included, and then we hear as many voices on the other side that say it’s not included it’s not part of it, but the truth of it is that it’s up to the interpretation of the tax professional and the individual to decide exactly what isn’t is not included.

Jason Stoch: Yeah, exactly!

What are the tax implications of getting a green card?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: When it comes to residency, what are the implications of getting a green card?

Jason Stoch: You’ll always be considered a US tax resident no matter where you’re living in the world, just like a US citizen, so you could be living in the US you could be living in Australia you could be living in Antarctica it doesn’t matter. You still have to file as if you are living in America. So that will always mean you have to disclose your worldwide income and assets when filing your US return.

America Josh:  Got it! So getting a green card, there is, you know, not to mention all the stuff that you have to go through to get a green card. Having one has pretty severe tax implications and is something that you should really consider before applying for one?

Jason Stoch: Yes, and then there’s also the consideration of if you’ve held a green card for too long, there might be an exit tax, so it’s definitely something you should plan for before just taking a green card.

What is the tax treaty between the United States and Australia?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: I keep hearing about some sort of tax treaty between the US and Australia. Do you mind just explaining what that treaty is all about?

Jason Stoch: Sure, that treaty which we’re lucky to have because there are some countries that don’t have one with America essentially is designed to prevent double taxation between both countries. So it’s for the interests of businesses and individuals to essentially save us tax dollars as opposed to having to pay tax in Australia fully and then in the US fully without any kind of credits being recognized, so it’s a good thing that it’s there.

America Josh: Got it! So at a country level, so at federal tax level, the idea is that if I’ve paid tax in one country, I file, and this is, I think, the important thing that I sometimes get confused about. I still have to tell the tax like the IRS in the US that this has happened but what should happen on that same filing as you say this happened, but I already paid taxes for it in Australia, and then it kind of comes out in the wash?

Jason Stoch: Exactly! It’s an exercise of firstly declaring the income on your US return as well as declaring the income tax paid on the same returns that the credits are calculated correctly.

America Josh: Got it! So it’s a federal level tax treaty, so it basically says that if I’ve paid tax in one country, I don’t have to pay the country tax, for example, in the US, for things I’ve already paid in Australia. What about state taxes and local taxes?

Jason Stoch: Yeah! So this is where the so you’re correct, but this is where every state almost operates as their own country because they all have their own view as to whether they honor those federal tax treaties. So the common ones that don’t would be California and New York. They want their tax money a ransom one that does, for example, is Illinois if you want to go to Chicago. So yeah, it just.

America Josh:  Okay, right! So some states can decide that yup, we are part like we’ve considered ourselves part of the treaty and you’ve already paid tax on this, but if you’re in New York or California, you would have to pay the full amount of tax even though you’ve paid for that in Australia?

Jason Stoch: Yes, exactly!

What’s the difference between the W8 and W8-BEN forms?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What’s the difference between w8 and w8 ben? Are they the same thing, or are there particular reasons I’m getting sent one and not the other?

Jason Stoch: They’re the exact same thing. It’s just how people refer to them.

America Josh:  Cool, well!

Jason Stoch: Yeah! The w8 is a short form of saying the w8 Bens.

America Josh: All right! So there’s not actually a w8 form separate from a w-a-b-e-n. It’s just called the w-a-b, and sometimes we cut off the b-e-n because it takes too long to say?

Jason Stoch: Exactly, yeah!

Do expats have to pay all the little extra taxes time?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Do ex-pats have to pay all of the taxes that you know I see on my payslip there’s a federal state and then there’s a whole bunch of other things listed on my tax return do I have to pay all of those taxes or just some of them as an ex-pat?

Jason Stoch: It depends! The reason for that is because certain visa holders are exempt from some of the taxes like FICA and Medicare; otherwise, it’s always federal and state if the state you’re living in has a state income tax.

America Josh: Don’t forget about local New York City really wants my money as well!

Can I buy property in the US on a visa?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Does the IRS mind if I buy the property or a house in the US while I’m a temporary resident like on a visa?

Jason Stoch: The IRS doesn’t mind for tax purposes, but depending on your visa, you should check with your immigration lawyer because there might be other considerations.

America Josh: Got it! So from a tax perspective, you’re effectively just like anybody else buying a house in the US. But yes always important to speak to an immigration attorney or someone that’s got some knowledge in this space about whether you can legally do that as opposed to tax?

Jason Stoch: Yeah, exactly!

Can my income and assets overseas affect my US tax return?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Can my income and my assets overseas potentially in my home country affect my US return?

Jason Stoch: Yes! The reason for that is because, as a tax resident, you do have to disclose everything, and it all flows into your tax return. But if it’s a country that has a tax treaty with America, then you can’t you can claim the tax credit, which should shield most of the tax on the US side. But be mindful that some states don’t recognize tax treaties, so you might be taxed again at the state and local levels.

What’s the deal with HECS and HECS HELP on US taxes?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What’s the deal with student loans or hex debt if you’re an Australian if you’re living abroad in the US?

Jason Stoch: Yeah! So if you have hex debt or help debt in Australia, you do always have to file an Australian return even when you’re no longer a tax resident, so that way the ATO can garnish your worldwide income to pay down your debts as if you are earning that money in Australia. So it’s not a tax; it’s debt, so two separate things.

America Josh: Okay! So you will have to keep paying your hex even though you’re living abroad?

Jason Stoch: Yes, you will!

Do I have to continue filing tax returns in my home country?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What about my taxes from my home country? Do I just ignore them because I’m now in the US, or do I have to do something with my taxes in my home country?

Jason Stoch: So it depends which country, but for example, with Australia, so long as you have income from there, you most likely will need to file a return to declare that income. Whether the tax return itself is only to do with that income and your US income is a different conversation dependent on your own situation.

America Josh: Awesome! So generally, I will probably have to pay taxes in both my home country and the US as a very general sort of sweeping statement. In most situations, I would have to pay or at least file both of those taxes?

Jason Stoch: Yes, and then where some countries may have a tax treaty with America such as Australia. You can leverage tax paid in one country to offset the other one, so you’re not double taxed.

America Josh: Awesome!

Do you have to keep filing US taxes after you leave?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What about when you’re done in the US? What about when you want to leave and go to another country or go back to your home country? Do you have to keep filing US taxes?

Jason Stoch: So it depends if you’re on a green card, you will have to continue to file because you’re treated the exact same as a US citizen, but if you’re on another visa, you then need to look at the substantial presence test to see. If you need to keep filing and assuming you are no longer a tax resident, the only reason you’d have to file a return is if you have US sourced income from that point forward.

America Josh: Got it! So if you don’t have, if you’ve m finished your job and you’ve left it, and that was the only source of income you had in the US, you were on a temporary visa you leave at the beginning of the year. And the substantial presence test doesn’t apply. You are effectively free and clear of the US, and you don’t have to worry from that point on?

Jason Stoch: Yep, you are free!

Do I pay taxes on foreign assets and investments at US tax time?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: So do I pay taxes on things in the US that I earned in my home country or in Australia? For example, if I own a house or I have some shares, do I pay tax on them while I’m in the US?

Jason Stoch: It depends on really if you pay tax to Australia on them because if so, whatever tax you pay to Australia you can use on your federal returns of the IRS calculates and give it to Australia’s tax rate higher than the IRS, you should be covered.

What documents do I need to prepare at tax time in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: So before I file during the tax season, which is between January and April 15 I need to collect some documents. What are the kind of documents that I need to prepare, whether I’m doing it myself or going to a tax professional?

Jason Stoch: Yeah, so it depends again, but essentially, at a minimum, if you’re an employee, you’ll get a w-2 form from your employer by January 31st that is the calendar year summary of what’s been paid to you as a salary as well as what’s been withheld from your salary with everything else. And then, if you have other things like US stock brokerage accounts, you would get 1099 from them, which shows all of your dividends and interest and capital gains from that brokerage. Outside of that, it would be any kind of deductions you’re eligible for, so if you’ve made donations and things like that. And then when you have foreign assets, it’s making sure you’ve got all of the appropriate things relating to those assets ready to go, such as rental property, statements, or foreign asset schedules ready to complete on your FBAR and things like that.

America Josh: Okay! So it’s really making a complete list of bank accounts investments income which is your w-2 and your 1099s, just getting everything into a big stack anything you can think of both in the US and in your home country or anything you have around the world.

Jason Stoch: Yes, and the only time again you’d have to deal with everything around the world on your US returns is when you are a US tax resident when you’re not, it’s only isolated to what you have in the US, which does make it a little bit easier.

America Josh: Awesome!

Can I earn money from abroad while in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Can I earn money from overseas for work I’ve done for an employer or work contract work I’ve done overseas while I’m living in the US?

Jason Stoch: Yeah, for tax purposes, that’s not an issue again. It’s something you should check, though, with your immigration lawyer because you don’t want to be in violation of your visa.

America Josh: That’s a really good point, and I know that you know a lot of the people that would be watching these videos would be e3 holders so e3 holders you cannot earn money cannot do jobs for anyone so be really careful or at least definitely speak with your immigration attorney.

What is FBAR?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: All right, what is FBAR?

Jason Stoch: The FBAR essentially is a compliance activity. It’s where you’re declaring all your foreign assets to an arm of the government called the FinCEN, which essentially is the crimes and enforcements network of the government, so they’re just essentially making sure that you are not Pablo Escobar.

America Josh: Damn it! They’re on to me, so the FBAR is something that we file at the same time as tax like it normally comes. You know you fill it in at the same time. Is it attached to your tax? Is it the same thing as, or is it like just a completely separate filing?

Jason Stoch: So it is filed together with your tax returns because it is handled by the IRS on behalf of the Fincen. There’s no tax on the actual accounts through the FBA again. It’s just the compliance activity you have to do annually, and the deadlines are tied in with your tax deadlines.

America Josh: So on an FBAR effectively, I just have to make sure that I’ve listed like all of my foreign accounts is that the idea.

Jason Stoch: yes, all of your foreign accounts and the rule for when you have to complete an FBAR is when your foreign accounts added together exceed ten thousand us dollars. So let’s say you have one bank account for nine thousand nine hundred ninety-nine dollars and one for one dollar. Both have to be declared because you’ve met that rule overall, so even zero-dollar accounts need to be declared at that point in time as well.

America Josh: Okay! So if any of your accounts sum up to ten thousand dollars, then all of your accounts have to be shown on the FBAR no matter the value them at any time throughout the year.

Jason Stoch: Exactly, and again there’s no tax on it; this is purely compliance.

Do expats have to file taxes in the US?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: Are visa holders required to file a US tax return at all.

Jason Stoch:  Yes! The reason for that is if you have US-sourced income at a minimum, you’re always going to have to file a tax return to declare and pay the appropriate tax on that income.

What are the implications of giving up a green card for US tax?

With Jason Stoch, Managing Director of UpTrend Advisory

America Josh: What are the implications of giving up a green card if you’ve had one for a few years and you’ve been a permanent resident, and you’ve decided I want to go back to my home country or go somewhere else and give up my permanent residency in the US?

Jason Stoch: So having a green card for a few years isn’t an issue. You can just file you know the i-407 with an immigration lawyer and then do your final tax return not a problem, but if you’ve held a green card for eight years, then you become what’s called a covered expatriate, which puts you in the scope of a potential exit tax that the IRS name onto levy for you to exit the US tax system. So would be good to avoid that if you can. So proper planning is essential to make sure you never even have to worry about an exit tax.

America Josh: Awesome! So if eight years if you’ve had a residency for a sorry permanent resident card for eight or more years and you’re thinking about going, you should first speak to someone like yourself, an accountant that can make sure you’ve prepared for what might come in the way of x attacks leaving the US?

Jason Stoch: Yes, and definitely don’t leave it to the last minute because I have seen situations where it’s they’ve held it for six years, but they also held it for two days. One of those days was on different calendar years, and so the IRS said, oh, it’s eight years.

America Josh: Wow! Okay, good to know, so prepare if you’re gonna get a green card. Know from the outset what the plan is and what the exit strategies are if in the future you might want to leave.

Jason Stoch: Exactly if you’re not planning on becoming a US citizen.

Recommended accountants for expat tax

I personally use Jason from UpTrend Advisory, he’s been super helpful with information for not just me but also lots of expats who are here and need some help (once-off, or ongoing)!

I have also heard great things about Glenn Hines from Australia America Tax Services.

Non-resident Filing

It is also worth noting that if you are filing as a non-resident, you are not entitled to a standard deduction and will need to itemize.

Be sure to understand your “residency for tax purposes” when it comes to tax as it does change things. I’ve written all about it, here.

Please note that Turbo Tax does not support non-resident filings if you are a non-resident for tax purposes, however, Sprintax does.

Typical expenses that can be itemized with limitations are:

  • Medical and Dental
  • State and Local taxes (i.e NY taxes)
  • Real estate tax
  • Mortgage interest
  • Gifts
  • Accounting fees

Whether you are entitled to a standard deduction or itemization, if you have children, you could be entitled to additional child tax credits.

Sales Tax is added at the checkout

Payroll taxes are what comes out of your pay check each week and what you clear up at tax time, but another tax you should be aware of when living in the U.S. is sales tax.

This is the “government markup”, shall we say (like GST in Australia). The price on the shelf is not your out-the-door price. If an item costs $10 and you live in an area with a 9.5% sales tax (like New York City), you will owe the cashier $10.95.

Not every area has a sales tax. Notably, Oregon does not impose one anywhere in its state and the sales tax rate varies by area. Suffice to say, prepare to pay up to 10% more than what the shelf price says in most areas of the country.

Extra information about tax for expats in the US