FREQUENTLY ASKED QUESTIONS
The Answers You Need
I WAS BORN IN SWITZERLAND AND HAVE A DUAL SWISS/USA CITIZENSHIP. I HAVE NEVER EVEN VISITED THE UNITED STATES…WHY DO I HAVE TO FILE A USA INCOME TAX RETURN?
United States and Eritrea, a northeast African country are the only two countries in the world that tax their citizens even if they do not live in the country. Moreover, United Sates permanent residents and work permit (Green Card) holders also have to file, even when they are no longer in the United States. The issue of US citizens living abroad double taxation came up during the latest tax code reform of 2017. Some politicians like a Member of Congress and House Ways and Means Committee Chairman Kevin Brady, and Mick Mulvaney, the White House budget director acknowledged the need to address this problem, but unfortunately due to budget constraints, there was no reform yet.
MY SPOUSE IS SWISS, DO THEY HAVE TO FILE A US INCOME TAX RETURN?
No, unless you choose to include them for the purpose of having a higher standard deduction or making other deductions. In that case you would file as “married filing jointly” and both of your incomes would be merged, but so would expenses and deductions. In some cases this may be advantageous to minimize your tax liability, but is associated with increased reporting burden.
I ONLY HAVE A POSTFINANCE ACCOUNT TO PAY CURRENT BILLS. THE ACCOUNT IS EARNING NO INTEREST, DO I NEED TO FILE FOREIGN BANK AND FINANCIAL ACCOUNTS (FBAR) REPORT?
From the IRS website: “[If you] had a financial interest in or signature authority over at least one financial account located outside of the United States; and the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported”, then you must file FBAR report.
I PAY SWISS INCOME TAXES TO CANTONAL AUTHORITIES. CAN I DEDUCT THESE ON MY US 1040?
Normally yes, but you may want to exclude your income using form 2555 instead. The situation becomes more complicated if you have children in which case you may be eligible for certain types of child credits but to qualify for these, you need to have reportable earnings which then cannot be excluded. If you feel confused, don’t worry, we almost feel confused writing this?! We can explain things when we discuss your situation at our initial meeting.
I MADE A MISTAKE AND THOUGHT THAT AS AN AMERICAN LIVING ABROAD, I AM NOT REQUIRED TO FILE US INCOME TAXES, BECAUSE I AM NOT USING ANY OF THE US-BASED SERVICES LIKE FIRE AND POLICE PROTECTION, EDUCATION, ROADS, BRIDGES, AND THE LIKE. NOW I HAVE LEARNED THAT I SHOULD HAVE FILED. WHAT CAN I DO?
The Internal Revenue Service has different programs to help get on board those taxpayers who have for various reasons missed making their annual returns. Many of these programs waive penalties and make it relatively easy to get current. Please contact our office for more details.