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A Boston International Tax Attorney Explains U.S. Income Tax Liability for Workers Abroad

Offshore Account Update

Posted on July 31, 2019 |

In today’s global economy, it is common for U.S. citizens to work abroad. And if these non-residents want to maintain their American citizenship, they will need to deal with their U.S. tax liability. With the complexity of international tax law, workers abroad will need to understand their U.S. tax obligations and deal with any reporting requirements.

A Boston international tax attorney can assist workers abroad in navigating U.S. tax law. If any dispute or conflict arises with the IRS, a tax lawyer knowledgeable about international tax issues can help with a successful resolution.

What Workers Abroad Need to Know About U.S. Income Taxes

The United States is unique for its position on foreign income. America is the only major country that taxes American citizens on their worldwide income. However, there are certain credits and exclusions that benefit American workers abroad. They include the following:

  • Foreign Tax Credit: The taxpayer can receive a credit on their U.S. tax bill for foreign taxes paid. The credit only applies to the same income subject to U.S. taxation. However, the working of this tax credit is not simple since it is based on a complex formula of a ratio of excluded income to non-excluded income. An experienced international tax lawyer can assess this credit for you.
  • Foreign Earned Income Exclusion: A taxpayer’s foreign earned income may be excluded from taxes up to an annual threshold, which currently exceeds $100,000.
  • Foreign Housing Costs Exclusion: Workers abroad may also exclude foreign housing costs that exceed certain thresholds.

Unfortunately, the intricacies of these credits and exclusions often result in tax reporting mistakes. In addition, workers in foreign countries may fail to fulfill their U.S. tax reporting duties, which can result in tax penalties and even criminal exposure. A Boston international tax attorney can advise and represent the taxpayer to overcome these hurdles.         

How an International Tax Lawyer Can Help

An international tax lawyer can help American citizens working abroad in numerous ways, including the following:

  • IRS Audits: If the IRS audits your foreign income, your international tax attorney can handle the audit on your behalf. Common disputes regarding foreign income concern the taxpayer’s residency and source of their income.
  • Offshore Accounts: If you deposit your foreign income into a foreign bank account, it is likely the IRS will still discover that income. The Foreign Account Tax Compliance Act (FATCA) compels foreign financial institutions to report certain account information to the IRS. Your attorney can advise you on reporting these accounts, as well as how to handle past failures to disclose foreign accounts or income.
  • Voluntary Disclosures: If a worker abroad has failed to report foreign income in the past, they may wish to come into legal compliance. The 2018 Updated Voluntary Disclosure Program and legal assistance can help taxpayers do just that, while minimizing penalties and avoiding criminal exposure.

Consult a Boston International Tax Attorney About Your U.S. Income Tax Liability

If you are an American citizen working abroad and facing IRS tax issues, contact a Boston international tax attorney at the Thorn Law Group today. For a consultation, contact Kevin E. Thorn, Managing Partner, at (617) 692-2989.


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