Yesterday the Roni Deutch Tax Center – Tax Help Blog posted a new article with advice for American taxpayers living outside the country. As the entry explains, even if you move to another country you are still going to have to deal with the IRS and U.S. taxes. I have included a section of the article below, but you can find the full text here.
The IRS Still Wants your Money
You may be surprised to learn that even through you may move out of the country, and work abroad, you are still required to pay taxes. Every year you will need to file a tax return claiming your worldwide income, even if you have already paid taxes on the income in the country you are living in. This applies to both earned income (such as wages or self employment income) and unearned income (such as capital gains, interest and dividends, etc).
Foreign Earned Income Exclusion
If you have been earning income while living abroad for more than a year, then you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. It would allow you to exclude up to $91,400 of foreign income for the 2009 tax year. The requirements depend on which country you are residing in, how many days you have been living there, and your worldwide income. This credit can be especially beneficial to taxpayers who might be subject to double taxation (those who have to pay taxes to both the U.S. government and their local tax authority). You can use the foreign income exclusion form (IRS Form 2555) to claim this deduction, but be sure you speak with a tax professional specializing in foreign income before sending off your return.
Foreign Tax Treaties