Ex-Pats and International Tax

Yes, but only if they consider the income in both countries. You cannot file returns in a vacuum reporting only US income to the US and vice versa.

It’s still wrong and they are getting poor advice. You could potentially pay twice the taxes on the same income! How? If one filing was audited (or not filed) and the other was closed due to a lapse of time. It will be too late to make any changes to the other return. – – (An un-filed return has no closing date. If the country where you did not file, or filed incorrectly, assessed tax on one of those years, you will not be able to amend the return you filed with the other country.)

Yes, if you are claiming a tax home in another country, that country has the right to tax worldwide income. You may be entitled to tax credits and exclusions based on your situation. Usually, you will not get double taxed. The tax treaties are in place to account for this.

IRS rules limit temporary assignments to less than 12 months in a metropolitan area, consecutively or non-consecutively. Though you may have treaty protection, your temporary status for deductible living expenses may cease. To keep them tax-free you will need to go to another part of the country. The only exception to this rule is a situation where the hospital itself provides housing on their campus – not an offsite apartment.

Children belonging to Mexican and Canadian taxpayers can be claimed. They will require an ITIN unless they have a SSN. We can help you obtain an ITIN for your dependents.

An ITIN is not a Social Security Number, it is a tax ID and it is only issued when a tax return requires an ID. ITIN’s can only be obtained by filing a W7 (Application for Taxpayer Identification Number) with a tax return. The return and ITIN application must be mailed with specific documentation of foreign status and identity. The request for an ITIN is processed by a specific IRS campus.

You will either: 1) have to mail ORIGINAL documentation OR 2) take your identifying documents to an IRS office that handles document certification. There is no flexibility in this requirement. It is best to get a copy of the spouse/dependents passport certified by a CONSULATE or EMBASSY of the country that issued the passport to avoid nasty waits and hassle.

Yes, though the treaty will decide functional residency for tax purposes.

This may sound odd, but the greater the refund, the less tax liability. When filing in your home country, your foreign tax credits are based on your tax liability, not your withholding. It is like a see-saw. Pay less here, pay more there, the total is the same – you will always pay the higher tax of the two nations. Good international tax planning focuses on minimizing your total tax liability, not just the liability in one nation. Sometimes it is a matter of taking exchange rates into account.

In 2004 and 2014, the USD/CDN exchange rate moved dramatically. This presented an opportunity. Since tax returns are based on events of the past, one currency may be more desired over another.

Days spent in the US is not important so long as the ties to the other country are sufficient to remain a resident of that nation. Tax treaties trump domestic law, so the rules governing tax residence may be based on your treaty claim.

1) Puerto Rico is considered a foreign country for tax purposes and vice versa. Residency is important!

2) Puerto Rico has its own tax system. Merely filing in the US is not sufficient.

3) A Puerto Rican resident with US income will prorate their standard deduction based on total income in both countries

These countries do not follow a calendar year tax regime. The income and taxes must be prorated based on when earned. In countries following different calendars, it is usually best to wait until the end of both calendar years have ended before filing.