This year, the start of the tax season was delayed until February 12, and so far there is no indication that the April 15 deadline will be extended as it was last year because of the Coronavirus Pandemic.
The IRS has already stated that they are expecting more than 150 million tax returns to be filed this year but because of backlogs, it's likely that millions of filers file their 2020 federal tax return before the agency has processed their return from 2019.
It’s mainly for these reasons that it's highly recommend that tax filers meet with tax expertos who can meet virtually and offer their tax services online, to prepare their tax documents beforehand and accelerate their tax filing process when it's time to file.
For Americans living abroad, filing your U.S. taxes may be an extra burden and I understand that it’s not always easy to know exactly how to prepare to file your U.S. Taxes.
Here are 4 tips you should follow as an American Expat to Prepare for the Upcoming Tax Season:
1. Take the time to prepare your documents, local tax forms and bank statements in one convenient place for following tax preparation:
I suggest you create a file in your computer specifically for the tax year, and put everything inside:
- Tax document from your country of residence
- Receipts from expenses
- Travel itineraries during the year that you made to and from the U.S.
- All your monthly Bank Statements
When the time comes to file your US tax, you will be prepared.
To make sure you have all the documents you need to prepare your U.S. expat tax return think about all the changes that took place during the year:
- Did you more abroad because of a job relocation?
- Did you have any unreimbursed employee expenses?
- Did you buy a new house abroad?
These and other situations will allow you to take even more tax deductions, and I want to make sure you have it all in place so that I can claim these deductions for you on your tax return!
2. This year in particular, there are some key items to consider that could highly benefit you, let's take a look at them:
Recovery Rebate Credit to claim Economic Impact Payment:
Taxpayers who received an Economic Impact Payment, should keep "Notice 1444 Your Economic Impact Payment" because you may be eligible to claim the Recovery Rebate Credit on your tax year 2020 federal income tax return if:
- You didn't receive an Economic Impact Payment, or
- the Economic Impact Payment that you received was less than $1,200 ($2,400 if married filing jointly for 2019 or 2018), plus $500 for each qualifying child
- You didn't' receive the Second Stimulus payment of $600 per individual plus $600 per qualifying child
If you didn't receive the full amount of the Economic Impact Payment for which you were eligible, I may be able to claim the Recovery Rebate for you when filing your Tax return in 2021.
*Also please note that if you received a stimulus payment, you do not need to pay taxes on it.
Taxable Refund Interest:
Taxpayers who received a federal tax refund in 2020 may have been paid interest. This means that if you received a refund on interest payments, you must report this amount on the federal income tax return because this amount is taxable. During the month of January 2021, the IRS will send a Form, called Form 1099-INT to anyone who received an interest totaling $10 or more. Please keep this in your record so that when the time comes to file your tax return, I can include this and make sure you're in full compliance.
Charitable deduction changes:
This year this is a new benefit that you don't want to miss out on! All taxpayers who don't itemize deductions and use the standard deduction (which is the deduction that most tax-filers use) may take an additional charitable deduction of up to $300 for the cash contributions that were made in 2020 to qualifying organizations. For more detailed information on this new benefit, read Publication 526, Charitable Contributions.
3. If you’ve recently had a baby, be sure to request a social security number for the little one, to be able to claim him or her as your dependent:
Claiming a dependent child on your tax return can bring you high credits and deductions, for example having a dependent may entitle you to change your status to Head of Household, which in turn means higher standard deductions, but please be aware that your filing status will be determined based on many other factors, claiming a dependent is only one of them.
On the other hand, claiming a dependent opens up the possibility to claim many other benefits and tax credits, such as:
- the child tax credit,
- the dependent exemption, and
- the earned income tax credit
In order to qualify for these credits and exemptions, however, you will need a social security number for your little bundle of joy. Without a Social Security Number, your baby would not qualify as a dependent on your tax return and you could miss out on these benefits that you're entitled to. Make sure to contact the Social Security Administration, or get in contact with me to process this arrangement for you.
4. If you experienced any changes with your income over the past year, you may need to adjust your W-4 withholding
If you receive income or a pension from a U.S. employer, it's always better to review form W-4 and analyze whether there are any adjustments necessary to make to form W-4. This is to ensure that the correct amount of tax is withheld. Reviewing this form is particularly important if you anticipate any changes like:
- Change in residency,
- Returning from a foreign job assignment to the United States,
- Changing your U.S. home of record
The best way to make sure you have everything you need is of course to consult with a Tax Expert that will be able to strategize your tax situation and ask you for everything we need to maximize your Tax Refunds and Tax Deductions. Don’t miss out on a single cent!
I'm a Tax Attorney and will be able to analyze all your circumstances and make sure that your tax return is filed to fit your particular circumstances, and this in return will result in maximizing your tax benefits, and legally reducing your taxes.
Contact me for a Consultation, I look forward to make your taxes work for you.