Taxes for US Expats Living in the Philippines

If you live in the Philippines as a U.S. expat and do not file your taxes with the IRS, you could face serious penalties.

A common error expats make regarding their U.S. taxes is thinking they no longer have to file them. Even if you live in the Philippines, you must file an annual tax return as a U.S. citizen. Understanding your tax residency status will be important when it comes to determining your eligibility for certain perks, like the foreign tax credit and the foreign earned income exclusion (FEIE). Our tax accounts can plan and prepare your taxes so that we lower your tax liability as much as possible while avoiding penalties from the IRS.

Call US Tax Help at (541) 362-9127 and learn more about what our tax CPAs for American expatriates living in the Philippines can do for you.

Avoiding Common Mistakes Expats Make When Filing US Taxes from the Philippines

Filing U.S. taxes from the Philippines can be challenging for just about anyone. Unfortunately, when expats try to file without the proper help from experienced tax accountants, they might make serious mistakes, like failing to report their worldwide income or inform the IRS of their financial assets held overseas.

Failure to File

Some expats assume their tax obligation to the U.S. goes away when they move to the Philippines when that is not the case. Regardless of whether you actually end up paying taxes to the U.S. after we claim the right exclusions and deductions, you must report your income to the IRS each year that you remain an American citizen, no matter where you live.

You might have a tax obligation to the Philippines as well as to the United States.

Misunderstanding Residency Status

Furthermore, misunderstanding your residency status could cause issues with your return. To get expat-specific tax perks, you may have to pass the bona fide residence test or physical presence test. When applying the bona fide residence test to a taxpayer’s situation, the IRS will want to see that they lived in the Philippines for an uninterrupted period that includes an entire tax year.

To pass the physical presence assessment, an expat must show that they were physically present in the Philippines or another foreign country for at least 330 full days during a consecutive 12-month period.

Depending on whether or not you still own property in or have substantial ties to your previous state of residence, you might also have to file a state tax return.

Incorrectly Reporting Worldwide Income

Expats living in the Philippines must report their worldwide incomes yearly to the IRS. Make sure you properly report income earned from all sources, both foreign and domestic. Even if errors are unintentional, any mistakes or inaccuracies could lead to penalties from the IRS.

FATCA Non-Compliance

Furthermore, expats might have additional reporting requirements when they move to the Philippines. For example, under the Foreign Account Tax Compliance Act (FATCA), expats with considerable foreign financial holdings have to report those assets to the IRS annually. You must attach a completed Form 8938 to your annual tax return if your financial assets held overseas in the Philippines exceed $200,000 on the final day of a tax year or $300,000 at any point in a tax year.

In addition to Form 8938, expats in the Philippines may also need to complete a Report of Foreign Bank and Financial Accounts (FBAR) if they have more than $10,000 in overseas bank accounts. If you must file an FBAR, our tax CPAs for American expatriates can help you do so electronically by Tax Day.

FATCA non-compliance will lead to serious financial penalties from the IRS, so learning about your reporting liability and honoring it will be important.

Poor Tax Planning

Approaching your U.S. taxes without proper preparation could result in an incomplete return that lacks the necessary exclusions and credits to lower your tax liability. Through tax planning, our tax accountants can review your income sources, dependents, expenses, and other financial information to identify which perks you are eligible for.

For example, many expats in the Philippines can claim the foreign earned income exclusion by filing Form 2555. This form allows you to exclude up to $126,500 of your foreign earned income from U.S. taxation, twice that amount if you file taxes jointly with your spouse.

Furthermore, we can help you take advantage of the foreign tax credit to avoid double taxation on your income earned in the Philippines. To do this, we will submit IRS Form 1116 when we file your annual tax return.

Late Filing

Expats who are unaware of their responsibility to report their income to the IRS might end up filing their taxes late. Fortunately, an immediate two-month reporting extension exists for expats living in the Philippines and elsewhere. While this can let you file later without penalty, interest will start building on any unpaid taxes on the original due date.

If you need even more time to prepare and submit your taxes from the Philippines, you can request an additional six-month extension from Tax Day. Expats who do not request further filing extensions when necessary might accrue interest on unpaid taxes and incur expensive financial penalties from the IRS for late filing.

If you owe back taxes to the IRS because you moved abroad and did not know about your tax liability, do not panic. Depending on how late your taxes are, you might still be able to claim deductions and get your tax refund for previous years. Furthermore, the IRS might agree to an installment payment plan if you have accumulated so much taxes that you cannot pay all you owe. Seriously delinquent expats risk passport revocation, so do not delay filing back taxes.

Call Our Tax Accountants for Expats in the Philippines Now

Call US Tax Help at (541) 362-9127 and get assistance from our tax CPAs for American expatriates now.

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