Are you planning to get back to the United States? In this blog, we will discuss the 12 tax tips that you must know before moving back to the United States. So, stay tuned and continue to read till last at USTAXFiling and get all the updates!

When you plan your income tax return to the United States after a stint abroad, it is necessary that you know how your move may impact your income taxes. Based on your foreign income and other aspects, you might be subject to different tax regulations in the United States. Here are twelve tax tips that you must know when returning back to the United States that are:

Major facts

• If you fail to meet your income tax obligations, you might have to pay penalties or additional filing requirements
• When returning back to the US, your income tax obligations may change
• By knowing your expat income taxes, you will take benefit of different opportunities to save

Tax tip 1: You may ask your employer to file departure paperwork if needed

If you are leaving a foreign nation permanently, your employer might ask you to file paperwork informing the foreign government about it. Few nations need special filings for the workforce who move away. If the appropriate paperwork is not filed, you might end up having to pay an exit tax, or you might run into problems with immigration control. Every nation has its own set of regulations, so be sure to know the needs of your current country of residence.

Tax tip 2: Know if your employer has grossed up your payments

If your foreign employer has made any income tax payments on your behalf while you were working overseas, it is necessary to ensure that your income tax return includes these payments grossed up. Gross up means that the tax on the income tax is paid entirely. If your employer’s income tax payments are not paid fully, you might have to file an additional income tax return in the future.

Tax tip 3: Understand your residency status

When moving to the United States, you might not be determined as a resident for income tax purposes right away. It might also depend on different aspects like:

• What United States-based properties do you have
• Your length of stay outside the United States
• What United States ties have you retained while overseas, such as a bank account or even a driver’s license

Your residency status will have a huge impact on your income tax obligations. Also, it is necessary that you know whether you may be a resident upon your arrival in the United States.

Tax tip 4: Don’t forget about the residency of the state

Expats moving to the United States might also have to determine state income tax implications as various states have their own set of laws related to taxation and residency. You might have to file state income tax returns and pay state income taxes based on the state’s tax regulations and residency status. You may check your state’s official site to know more.

Pro tip:

You may find your state’s website quickly through the list offered by the Internal Revenue Service.

Tax tip 5: Determine offloading foreign bank assets and accounts 

Americans staying overseas are subject to additional reporting needs. For instance, if you have more than $10,000 deposited in a foreign bank account, you may have to file an FBAR (Foreign bank account report). If you have foreign properties valued above specific criteria, you have to file a FATCA report. Those properties and accounts are necessary while staying overseas, but they might not be needed after moving to the US. By offloading what you don’t need any longer, you may decrease your income tax obligations.

Tax tip 6: Know the income tax implications of selling foreign assets

If you plan to sell a property located abroad, such as a foreign home, you might be income taxed on any capital gains from the sale. Also, if you are selling a house that you used as your main residence for at least two of the last five years, you may exclude a gain of more than $250,000 from taxation ($500,000) if married. You might also be subject to income taxation on any capital gains that result from the sale of a foreign stock or any other investment.

Tax tip 7: You may take a refund for your foreign social security contributions

Several expats have to contribute to a foreign social security program while working abroad. In a few scenarios, you may get a refund for those contributions after moving to the United States. You may connect with the local income tax authority or even the social security agency to know if you are eligible for a refund. Contributions to a foreign company’s social security system are income tax deductible, so it is necessary to know the income taxability of any refund.

Tax tip 8: You must keep track of deferred compensation

In many countries, you have to pay and file income tax payments upon receipt of deferred compensation earned while working over there. It includes:

• Bonuses
• Severance pay
• Stock options
• Restricted stock options

When you receive a payout or the deferred item vests, you might have to report this to the foreign government. Also, you must keep track of your deferred income while staying overseas so it might be allocated properly.

Tip 9: Consider what to do with your foreign pension

If you have accrued a foreign pension while staying overseas, you might have to bring your savings back to the United States. Also, many foreign pensions cannot be rolled over into a US-based plan of retirement. It leaves you with some options: 

• You may leave the funds in your foreign pensions and even pass them on to your heirs.
• You may leave the amount in your foreign pension and also withdraw them as you are eligible.
• Withdraw the complete pension when you return back to the United States. Then, you might even reinvest them into a US-based retirement account. It may turn into early-withdrawal charges that might reduce your income too.

You may consult an eligible tax expert to know which option is best for you.

Tax tip 10: You may claim any tax deductions and credits available 

The Internal Revenue Service offers a range of tax benefits for Americans staying overseas, such as FTC (Foreign tax credit) and FEIE (Foreign earned income exclusion). Even after moving to the United States, you might still be able to claim the benefits for any income earned before returning back. 

For instance, if you arrive on 17 August in the United States, you may use FEIE (Foreign earned income exclusion) to exclude your foreign income earned from 1 January-16 August of that financial year. You may use the FTC (Foreign tax credit) to decrease any income taxes on any income earned on future business receipt of deferred compensation or trips overseas. An expat tax assistance will help you with your options.

Pro tip

For more details about methods to save big on your US expat income taxes, you may check out our guide for Americans working abroad.

Tax tip 11: You may use streamlined filing to catch up on your expat income taxes

All citizens of the United States have to file a US income tax return regardless of where they stay across the globe: Several expats are unaware of this need. Also, the Internal Revenue Service offers an amnesty program: 

Streamlined filing compliance. By using this grant, you may catch up on your expat income taxes without the usual charges. 

Tax tip 12: Get assistance with your expat income taxes when moving to the US

Returning back to the United States may have severe implications for taxes. We would suggest consulting an eligible income tax expert before making any big decisions. In this manner, you may remain compliant with the United States regulations and eliminate any unnecessary consequences after coming back to your home.

At USTAXFiling expat tax help, we will aid Americans around the globe to manage their US income tax obligations. Our talented and dedicated team of expat expert IRS and CPA enrolled agents are standing by. Our USTAXFiling experts have rich years of experience and vast knowledge to help you with tax filing needs. If you have any queries related to moving back to the US, you may consult our USTAXFiling experts, and they will resolve all your doubts at the earliest! Book your appointment now with USTAXFiling, your tax assistant!