When preparing for your upcoming tax returns it is important to think ahead on what documents you need. Expat tax prep will help the process feel smoother and if there are any documents you are missing you can find out how to get them in a timely manner. We will go over which documents we feel you need to ensure a streamlined process!
Basic Required Information
You want to begin Expat tax prep with locating and providing your previous year’s tax return. This tax return will serve as a point of comparison so that the accountant you have chosen can easily notice any changes that have occurred in the current tax return. Filing your tax return accurately is especially important to remain in right standing with the IRS and your tax specialist will help you with pointing out any information that you could be missing. If you plan to make trips overseas frequently throughout the year then it would be helpful to plan out a travel calendar numbering the days you are in the United States and overseas. This will be helpful when you look to become qualified for the Foreign Earned Income Exclusion
Further, one of the first documents you are most likely to fill out when starting the process is a “tax questionnaire”. A tax questionnaire is a document used to collect information about the client’s tax situation. This questionnaire is typically used when you are seeking help from an accounting firm. The information that is collected usually requires you to provide your name, address, dependent info, and ID numbers. Another thing to think about is any activity that you engaged in that may have an effect on your taxes. A tax questionnaire is important for you to analyze your current tax situation and for the accountant to understand how to best help you.
Income
In this section we will go over documentation regarding sources of income that will be important for you to be prepared with for your next tax return.
It is important to report wages including updates regarding your income. You will typically receive W-2 forms or your host country’s equivalent from your employer. However, if you are self-employed then you must provide records of your earnings and deductions for the calendar year. For each interest-bearing account you are required to provide the income relieved on each account, regardless if the account is closed. Providing statements to your accountant along with Form 1099 will help your accountant gather information to help you prepare for your upcoming tax return.
If you are investing in stocks or other securities then it will be important to make sure you received a statement from your investment broker. The statement should included securities sold, the sale and purchases dates. This helps your account determine the gains or loss one your investments in securities.
Perhaps you just sold your home or are involved with owning and renting property overseas. Regardless, if you were involved in the sale or purchase of real estate be sure to expect it to effect how your tax returns. For rental properties, you will be required to provide a financial statement detailing the income and applicable expenses, when the property was acquired and how many times and for how long it was rented for during the calendar year.
Withdrawing funds from your retirement accounts must also be reported. Equivalent accounts may be your pension, IRA, annuities, or profit sharing. Typically, the financial institution will send you a Form 1099-R or a foreign equivalent. This is required on your overseas tax return. Further, your Social Security Benefits are required. They will be reported to you via Form 1099-SSA.
Other sources of income such as businesses, trusts, or partnership interests will also need to be reported. A Schedule K-1 will need to be submitted. Any other types of income can be reported on Form 1099-MISC. Unemployment benefits, alimony or child support can also be reported on Form 1099-G.
Deductions
Interest paid on mortgages, loans etc. can be deductible on your expat tax return. Some other deductibles can include real and personal property taxes, and local excise taxes. Other sources of deductions can include foreign housing expenses but you will need to provide details that include rent, utilities, property insurance, repairs and parking. Your children and other dependents can also count towards deductions. You must provide all dependent information as well. Deductions could also come from medical expenses that were not covered by your insurance, charitable donations, gifts , or unreimbursed business expenses.
You must also report Foreign bank accounts. At any point of the calendar year, if you have an aggregate balance overseas of over $10,000 than you must report this by the April 15th deadline to the United States Treasury. This will be done by filing an FBAR Form FinCen 114.
If you are still unsure of what documents you need for your Expat tax prep, contact us today! We are a team of licensed professionals who are willing to ensure a smooth process for your next tax return. Get started now!