Navigating the US Tax Jungle: A Survival Guide for Singapore Expats
This article was published in the March 2015 edition of the Singapore American Newspaper and can also be viewed on page 5 here. The blog post below includes updates since this article was originally published.
As an expat, trying to file your U.S. tax return can feel like navigating through the jungles of Borneo; but instead of tigers and orangutans, the jungle of the U.S. tax code has over 70,000 pages of confusing laws that are changed and added to every year. The following 5 rules are a survival guide for U.S. expats living in Singapore. Whether you are new to expat life or a seasoned veteran, this guide will help you navigate your way.
Survival Rule #1: Know your deadlines
Expats overseas on April 15th are granted an automatic extension until June 15th to file their U.S. Federal tax return. That’s right – you have an additional two months to file! If you need additional time you can obtain an extension until October 15th by filing Form 4868. If you moved to Singapore in 2015 you may want to consult with a tax professional as different extension procedures may need to be followed.
While you may request an extension to FILE your tax return, there is no extension to PAY your taxes. No matter what your filing date is, 2014 U.S. income taxes owed are due by April 15th, 2015. Taxes paid after April 15th will be subject to interest (currently 3% per year). After June 15th, a late payment penalty will also apply.
Survival Bonus: The penalty for filing late is greater than the penalty for paying late, so always file your tax return on time even if you can’t make full payment.
Don’t forget about Singapore taxes! Your 2015 Singapore tax return is due April 15th 2016. You will receive your 2015 income tax bill by September 2016.
Survival Rule #2: Understand the special tax rules for expats
As an expat you may be able to claim the Foreign Earned Income Exclusion which reduces your taxable income. The 2015 exclusion was $100,800; for 2016 it is $101,300. If married and both spouses work, EACH spouse is able to claim the exclusion. In addition, if you are living in a rented house/apartment you may also be entitled to the Housing Exclusion which further reduces your taxable income by allowing for a deduction of rental expenses.
If your foreign earned income is above both of the exclusions, you can also claim a foreign tax credit for a portion of the taxes owed to Singapore. While the exclusions reduce your taxable income, the foreign tax credit directly reduces the amount tax owed.
Survival Rule #3: Don’t forget the FBAR
FinCEN Form 114, more commonly known as the FBAR, is filed separately from your federal tax return. The FBAR is required if you had over $10,000 USD in aggregate among all of your non-US financial accounts at any point during 2015. Don’t worry, this form only reports information and does not trigger any taxes. The 2015 FBAR is due by June 30th, 2016 and should be filed online with the Department of Treasury. (UPDATE: Starting with your 2016 FBAR, the due date will change to April 15, 2017 and there will be an option to file an extension.)
In addition to the FBAR, you may also need to file the similar Form 8938 ‘Statement of Foreign Financial Assets’ with your tax return if your non-U.S. assets exceed certain IRS thresholds.
Survival Rule #4: Caution! Other expat issues
The section below is not an all-inclusive list of other expat issues, but highlights some important ones.
Ownership in a non-US business: The expat community is full of entrepreneurs, so if you become an owner, director, or partner in a non-US business there may be additional reporting requirements.
Non-U.S. Rental Property: If you own rental property outside the United States, it is still reportable on Schedule E of your U.S. federal tax return.
Central Provident Fund (CPF): If you are a Singapore Permanent Resident (PR), you will have a CPF account (a social security/retirement savings plan). Make sure to report both your employee and employer contributions on your U.S. tax return. Also make sure to report the CPF on your FBAR (and Form 8938 if required to file).
Affordable Care Act (ACA): The ACA (a.k.a Obamacare) became effective in 2014 and requires all U.S. persons to purchase minimum essential health coverage. There is an exemption available if you were living outside the U.S. and Form 8965 will need to be filed with your tax return to claim this exemption.
Survival Rule #5: Beware of Scams
Look out for fake emails and calls claiming to be from the IRS no matter how official they may look or sound. The IRS will never send you an email or randomly call about a refund or bill out of the blue. These scammers are looking to steal your personal information.
Whether you prepare your own taxes or work with a professional, it is now your mission to navigate the jungle of your own U.S. tax return!
Kaitlin M. Krozel, owner of Krozel Capital, is herself a former Singapore expat. She continues to work with many clients in Singapore and around the region. For a consultation or quotation for tax services, you may contact her here.