Thursday, January 23, 2014

Are You Required to File a 2013 US Tax Return? What if I live outside of the U.S.?

Are You Required to File a 2013 US Tax Return?

According to the IRS, generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount of your standard deduction and exemptions.  This criteria applies if you are a U.S. citizen, or a resident alien and if you are in the United States or abroad.  

In addition to the income requirement for filing you may still need to file if your self employment income exceeds a certain amount and you also may want to file to get excess taxes withheld refunded.

Filing Requirements
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and for paying estimated tax are generally the same whether you are in the United States or abroad.
Your income, filing status, and age generally determine whether you must file an income tax return. Generally, you must file a return for 2013 if your gross income from worldwide sources is at least the amount shown for your filing status in the following table.
Filing Status*Amount
65 or older$11,500
Head of household$12,850
65 or older$14,350
Qualifying widow(er)$16,100
65 or older$17,300
Married filing jointly$20,000
Not living with spouse at end of year$3,900
One spouse 65 or older$21,200
Both spouses 65 or older$22,400
Married filing separately$3,900
*If you are the dependent of another taxpayer, see the instructions for Form 1040 for more information on whether you must file a return.

Gross income.
   This includes all income you receive in the form of money, goods, property, and services that is not exempt from tax.
  For purposes of determining whether you must file a return, gross income includes any income that you can exclude as foreign earned income or as a foreign housing amount.
If you are self-employed, your gross income includes the amount on Part I, line 7 of Schedule C (Form 1040), Profit or Loss From Business, or line 1 of Schedule C-EZ (Form 1040), Net Profit From Business.
Self-employed individuals.   If your net earnings from self-employment are $400 or more, you must file a return even if your gross income is below the amount listed for your filing status in the table shown earlier. Net earnings from self-employment are defined in Publication 334, Tax Guide for Small Business.
65 or older.   You are considered to be age 65 on the day before your 65th birthday. For example, if your 65th birthday is on January 1, 2014, you are considered 65 for 2013.
Residents of U.S. possessions.   If you are (or were) a bona fide resident of a U.S. possession, you may be required to file Form 8898, Statement for Individuals Who Begin or End Bona Fide Residence in a U.S. Possession. See the instructions for the form for more information.

You May Still WANT TO file

Why would you WANT TO file if you don't have to?  Maybe to get some of your money back or to get other money you may be entitled to.  In addition you may need to a filed tax return for other reasons, like to meet requirements for a loan application.  Here is what the IRS said about filing if you don't have to:
Even if you do not have to file, you should file a federal income tax return if you can get money back (for example, you had income tax withheld from your pay; you qualify for the earned income credit; or you qualify for the additional child tax credit). See Who Should File in Publication 501, Exemptions, Standard Deduction and Filing Information, for more examples.

But what if I live outside of the U.S.? 

These requirements typically apply whether you are living in the U.S. or abroad.  No matter where you live a person who is required to file a U.S. income tax return, like a U.S. citizen living in another country, you are required to report all your worldwide income. While it might seem logical that you should not have to file if all your income was earned abroad, you are required to report all of your worldwide income on your U.S. Tax Return.  Logic has nothing to do with the requirement. Obviously.

While you have are required to report worldwide income you may be able to exclude some of it on your tax return if you live abroad.  Don't be confused by the terminology, you still have to report the worldwide income on your tax return but the term exclude refers to backing the income out for income taxes purposes after it has been reported.  So you report it on one line of your tax return and then you get to back it out later if you meet the requirements.  In most cases the excluded income can still be subject to employment taxes.  See my prior post on this subject.

Reporting Foreign Bank and Financial Accounts

In addition, if you had over $10,000 in a foreign account at any time during 2013 you may have some other reporting requirements.  I plan to soon have another post published on this subject.


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Jeff Haywood, CPA
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My posts contain general information that does not fit every situation, they are not all inclusive, and as always for your tax situation everything "depends on facts and circumstances."  In addition, the information/IRS requirements are always subject to change.  So call me to talk about your specific facts and circumstances and what you want to accomplish.