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Filing US Taxes Abroad

Expat taxes for Americans living & working in the Czech Republic
by Emily Prucha
13.01.2017 11:00

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For American citizens living and working in the Czech Republic, figuring out how to file annual Czech
income taxes can be a challenge. Add the responsibility of filing US taxes on all income earned (both
within and outside the US), and the situation becomes even more complicated, particularly for those of
us who dont understand the basics of the income tax system.

In accordance with US tax regulations, any American citizen or green card holder who has reported
income within a fiscal year must file US taxes. Although a US citizen may not end up paying taxes on
income earned abroad, he is required by law to go through the tax filing process.

Information on the Internal Revenue System is available on the US Embassy in the Czech Republics
website. There are links to resources for filing taxes from abroad as well as Federal Benefits and
Obligations.

To get a local perspective on how to file taxes from the Czech Republic, Prague TV spoke with Peter
Piater, a tax accountant at the Prague-based firm Expat Taxes, to clarify frequently asked questions
about the requirements of the US income tax system.

Filing your US taxes for 2016 doesnt have to send you running into the nearest Czech bar to drown
your sorrows. Follow these guidelines to file your US taxes on time and opt for a celebratory pub visit
instead.

Who is required to file US taxes?

In general, all US citizens and green card holders living in United States or outside of the United States
are required to file US income taxes on any income earned during that fiscal year. Nonresident aliens
living and working part of the year in the US must also file taxes. For example, Czech and Slovak
students who were in the US for internships, work and travel programs on a J1 Visa, must file US taxes
in order to obtain a US tax and social security refund.

There is, of course, a gross income limitation, which if you do not reach, you do not have to file a US tax
return. For a single person, it is 10.350 USD in 2016.

How do I get started?

Dont panic. If it is your first time filing a US tax return, start early. If you are unsure about filling out
the forms on your own, contact a tax professional. Even straightforward black and white information
might become unclear and explainable in multiple ways when you actually start filling out the form.
What do I need?

Collect your documents before you begin. Expat Taxes offers a handy check list of all the necessary
documents and basic information you need to file a US tax return. Documents include your proof of
employment in the Czech Republic, your Czech residency status, your Czech tax return, CZ/USA 1
Form, 1099 forms, W2 forms, SSN, marital status, entry to Czech Republic, date/copy of last tax return,
etc. (depending on individual circumstances).

Does the Affordable Care Act (Obama Care) apply to me?

Affordable care or Obama Care requires every American to have health insurance or to pay a yearly
penalty when filing income taxes. If you are an expat who has been living abroad for more than one
year, you do not have to pay your healthcare insurance in the US because you are required to pay it
abroad (in our case, in the Czech Republic or Slovakia). If you live abroad for only part of the year or
not for a complete calendar year, then you are required to pay for healthcare in the US for that year.

However, if you are sent by a US employer to the Czech Republic for less than 5 years, you pay health
insurance and also social security only in US for the whole 5 years. If you will be in the CR for more
than 5 years, or if you find a job by yourself in the CR, you pay social security and health insurance in
the CR.

If my husband/wife is Czech and files Czech taxes, and I as a US citizen do not have any income in
the CZ Republic, do I still have to file my US taxes?

No, you do not have to. But, there are two questions hidden in this one. First, you need to decide your
filing status. If your spouse is not a US citizen, you must file as the head of the household to claim any
dependents (children) on your tax return. If you do not have children, you can file as married but filing
separately.

You are then not required to file a US tax return only if you do not have any income from any other
country in total more than 13,350 USD (if you are filing as head of the household) or greater than 4,050
USD (if you are married filing separately).

If you are self-employed (working on a zivno), then the limit for filing is only 400 USD/year because
of self-employment/social security tax.

Note that these minimum earnings amounts change each year by a few hundred dollars.

If I am self-employed (working on a ivnostensk list) is there anything special I should know?

Self-employed Americans should be careful. If you are self-employed, even if you can exclude foreign-
earned (i.e. self-employment) income from your US taxes, you are responsible for paying self-
employment tax. Since the Czech Republic has a Totalization Agreement with the US, generally if you
can prove that you pay Social Security taxes in the Czech Republic, you do not have to pay it again in
the US. However, your obligation of filing taxes remains because on the tax return, you must prove that
you are not obliged to pay the self-employment tax in the US.

How do I know if I need to file an FBAR?

You have to file an FBAR or foreign bank account report if you own a bank account, or have signature
right over, one or more foreign bank accounts and the total value of those accounts exceeds 10,000 USD
at any time during the year.

Is it harder to file US income taxes or Czech income taxes?

The logic and format behind filing in both countries is the same. You add together all your revenues
from all sources and when you have the sum, you try to decrease it as much as you can by all kinds of
deductions or credits. An expat tax return is a bit more complicated and requires more forms, such as the
foreign income exclusion and social security coverage (for self-employed) in the Czech Republic.

I haven't filed my US taxes in ten years? How does back filing work?

Back filing is filing under a streamlined offshore procedure, which the IRS created. If you file the last 3
years tax returns and pay taxes for the last 3 years you missed as well as file FBARS for the last 6 years
you missed, then you are permitted to start filing taxes with a clean slate. You do not pay any penalties
or interest on top of the taxes, even if you did not file and did not pay income taxes for 10 years.

To use this procedure, you have to complete the form 14653 and show that you did not omit
paying/filing taxes intentionally that it happened instead due to non-willful conduct.

If you want to get back on track in Jan 2017, you are required to file the last 3 years you missed 2013,
2014, 2015 and the actual year 2016. If you realize, for example, in October that you haven't filed for
years, you do not have to wait for the tax season in January. You can file those 3 delinquent tax returns
and 6 FBARs in October.

When are my US taxes due?

Submitting of a tax return and paying taxes is due on the 15th of April or on the first next working day
thereafter. In 2017, it will be the 18th of April. However, Americans residing abroad are granted an
additional two months, so the due date is the 15th of June 2017. The automatic 2-month extension also
applies to paying the tax. However, you will owe 2-months interest on any taxes due, if the taxes are not
paid by the 18th of April.

In closing, remember that specific questions about particular circumstances should always be addressed
to a tax authority.

If you need help filing your Czech taxes, read Prague TVs article on filing expat taxes in the Czech
Republic.
Foreign Earned Income Exclusion
If you meet certain requirements, you may qualify for the foreign earned income and foreign housing
exclusions and the foreign housing deduction.
If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on
your worldwide income. However, you may qualify to exclude from income up to an amount of your
foreign earnings that is adjusted annually for inflation ($92,900 for 2011, $95,100 for 2012, $97,600 for
2013, $99,200 for 2014 and $100,800 for 2015). In addition, you can exclude or deduct certain foreign
housing amounts.
You may also be entitled to exclude from income the value of meals and lodging provided to you by
your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens
and Resident Aliens Abroad, and Publication 15-B, Employer's Tax Guide to Fringe Benefits for more
information.

Other Rules
Not foreign earned income: Foreign earned income does not include the following amounts:
Pay received as a military or civilian employee of the U.S. Government or any of its agencies
Pay for services conducted in international waters (not a foreign country)
Pay in specific combat zones, as designated by an Executive Order from the President, that is
excludable from income
Payments received after the end of the tax year following the year in which the services that
earned the income were performed
The value of meals and lodging that are excluded from income because it was furnished for the
convenience of the employer
Pension or annuity payments, including social security benefits

Self-employment income: A qualifying individual may claim the foreign earned income exclusion on
foreign earned self-employment income. The excluded amount will reduce the individuals regular
income tax, but will not reduce the individuals self-employment tax. Also, the foreign housing
deduction instead of a foreign housing exclusion may be claimed.
Figuring the tax: Beginning with tax year 2006, a qualifying individual claiming the foreign earned
income exclusion, the housing exclusion, or both, must figure the tax on the remaining non-excluded
income using the tax rates that would have applied had the individual not claimed the exclusions.
Requirements
Can I Claim the Exclusion or Deduction?
Tax Home In A Foreign Country
Bona Fide Resident test
Physical Presence Test
Exceptions to Tests
Figuring The Exclusion
Choosing The Exclusion
Revocation
Which Form to File
Foreign Housing Exclusion or Deduction
Individual Retirement Arrangements
Extension to Claim Foreign Earned Income Exclusion
Application of Foreign Earned Income Exclusion and the Combat Zone Exclusion to Civilian
Contractors Working in Combat Zones (PDF)

References/Related Topics
Form 2555, Foreign Earned Income
Form 2555-EZ, Foreign Earned Income Exclusion
Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax
Return
Form 2350, Application for Extension of Time to File U.S. Income Tax Return
Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
U.S. Citizens and Resident Aliens Abroad