Unique Filing Considerations for
U.S. Taxpayers Living Abroad

WASHINGTON - The filing season is not yet over for United States taxpayers living overseas, but with their June 15 deadline rapidly approaching, the Internal Revenue Service suggests they review tax considerations unique to filing from abroad.

As of mid-May the IRS had received 352,000 income tax returns from overseas, as compared to 313,000 at this point last year. More than 500,000 returns are expected to be filed.

Taxpayers living and working abroad may be entitled to exclude from federal income tax up to $70,000 of foreign earned income. The IRS emphasized that this exclusion is not automatic. To qualify, taxpayers must file a tax return electing the exclusion, even if their income is less than $70,000. The return claiming the exclusion must be filed within one year of the original due date of the tax return.

The IRS reports that the most common error made on tax returns received from overseas so far this filing season involves computation of the earned income credit. This credit is based on earnings of less than $19,340 and is available to taxpayers who maintained a home in the United States for a dependent child and lived there for more than half the year.

Taxpayers needing information to complete their forms may call any of 14 IRS offices located in embassies and consulates throughout the world, or the international taxpayer service office in Washington, D.C. at (202) 287-4301. IRS maintains overseas offices in Bonn, Caracas, London, Manila, Mexico City, Nassau, Ottawa, Paris, Riyadh, Rome, Sao Paulo, Singapore, Sydney and Tokyo.

Those taxpayers overseas who need additional time beyond June 15 to file tax returns must file Form 4868 to request an extension until August 15.

In a "town meeting" held in London earlier this year, issues were addressed that will help the IRS improve service to those living abroad. One change being instituted is the mailing of bills and notices by airmail to shorten delivery time.

The IRS said it is also reviewing forms used by overseas taxpayers as part of its ongoing simplification efforts. In addition to using the same forms filed by individuals living in the United States, many overseas taxpayers use Form 2555 to claim the foreign earned income exclusion, Form 1116 to claim a credit for foreign taxes paid, and other specialized forms.

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