Carlie: Hey there, it’s Carlie. I’ve been hosting the Expat Focus Podcast for a good eight years now, and I want to continue making it interesting and relevant for you. So myself and the team here at Expat Focus would love your feedback, and we’ll even give you an Amazon gift card for your time. For more details, you can email contact@expatfocus.com.
Even American citizens living abroad need to file a U.S. tax return every year, and there can be nasty penalties if they don’t. The U.S. tax filing season has recently kicked off, so I’m speaking to Nathalie Goldstein from MyExpatTaxes to find out how to make the tax filing process as stress free as possible.
Natalie, it’s great to have you on the Expat Focus Podcast. I should introduce you to people properly. You are Nathalie Goldstein, the CEO of MyExpatTaxes. Welcome!
Nathalie: Hi! It’s so good to be here and yeah, it’s…you know, for anyone listening, we’ve had quite a fun chat up to this, so ignore us if we’re already giddily.
Carlie: We’re just talking about the fun of a tracking camera, which if you are watching this episode on the Expat Focus YouTube channel, you might see my camera doing weird things if I make sudden moves during this episode. So apologies in advance for that if it’s distracting, but just listen to our dulcet tones and you’ll be fine! Nathalie, we are going to talk all about the obligations of U.S. expats in terms of filing their taxes from abroad. But firstly, I wanted to ask about you because you are an expat, an immigrant yourself, living in Austria. How did that come to be?
Nathalie: Yeah, so I am originally from San Jose, California. I’m not really Austrian. Maybe you have figured that one out! I always thought I’d live my whole life in California. It was…it’s the epicenter of the world, is what I was told. You’re in Silicon Valley. This is the place to be. Everyone wants to be exactly where you are. You won the lottery and that’s it. This at least was my understanding of where I was…
Carlie: Were you in your 20s at the time because…?
Nathalie: Exactly, that was in my 20s. And then I moved abroad…or let me start: and then I studied abroad. I studied abroad and I met my now Austrian husband, so just, spoiler alert if you’re wondering why Austria. But I studied abroad, I saw how Europe was, and I just saw, “wow, you don’t have to live the way that you live in California, in Silicon Valley in the U.S.”
You can honestly put any place there. It’s not specific to San Jose. It’s not specific to California or the U.S., but it’s this weird understanding that you don’t have to live in this bubble you grew up in. And that if you are so privileged, and of course, I’m so privileged because not everyone gets this choice, not everyone’s so lucky to say “I can live wherever I want”.
But if you win the real lottery of being able to choose and having that ability, I just saw that there was a different lifestyle that just accommodated a lot more to what I wanted out of life. So, I don’t know if that answered the question. That is how I came to move from San Jose to Austria.
Carlie: And how many years has it been now?
Nathalie: Almost 10. This May will be 10 years.
Carlie: Yeah, I just marked 11 myself. This is my 11th year.
Natalie: Wild!
Carlie: The thing I think about the most is that when I got on that plane and I said to my mum, “oh, I’ll be disappointed in myself if I don’t last at least a year.” And I fully expected I’d be back to Australia in two years. And where did the decade go?
Nathalie: Yeah. It’s crazy. It’s crazy. Yeah, my mom…I remember I asked my mom what should I do? Should I stay here? Because this is where people make money, right? This is where you become successful. This is where…
Carlie: California?
Natalie: Yeah. California. This is where the startups are. This is where it is. Should I stay here? Should I go? And she told me you can always buy a ticket home.
Carlie: That’s what my mum said too! Mums, right?
Nathalie: Moms, they’re good! I’ll say the same to my daughter one day, I guess. And she just said, “you can make money anywhere, but you can’t find love everywhere. So just go, if it doesn’t work out, always make sure you have enough money to buy a plane ticket home.”
Carlie: Onto slightly more boring administrative topics, which affect yourself too, Nathalie, as an American living abroad. At the time of recording this U.S. tax filing has opened for the season. Broadly, can we start with you explaining who needs to file U.S. taxes?
Nathalie: Yes, so the boring part, and I hope I can still make it somewhat interesting and entertaining, or if you’re an American, I feel your sympathy. If you’re not American, I guess you’re listening to this being like, “well I’m glad I’m not American!”
If you are a U.S. citizen, if you are a U.S. green card holder, and you haven’t properly given up your green card, if you are in the U.S. for a longer amount of time, you have to file a U.S. tax return. The U.S. is after your worldwide income. And while that seems, obviously scary, unfair, if you think about any country that you live in you are taxed on worldwide income, generally.
So the U.S. has that same principle that they will tax its tax residents of worldwide income. The only thing is that the U.S. defines worldwide residents…or defines U.S. tax residents as someone that has citizenship or, like I said, a green card or is actually physically present as a resident in the U.S. So they’re a little far reaching with their definition of a tax resident, to say the least.
Carlie: I know when I moved to the UK, I just figured, “hey, I’m not living in Australia, I don’t need to file Aussie tax returns, I’m earning money in the UK.” And then someone said to me in a Facebook group, maybe six years in: “no, no, that’s not correct. You still need to file every year, even if you’re just putting 0, 0, 0, 0, 0, on your tax return.” And I was like, “oh crap!” And so I had a full day once of just like logging in: okay, this year, the next year, the next year. It’s wild. Haven’t made that same mistake again.
Nathalie: Yeah. It’s crazy. It is not always that black and white. And as people are moving and earning income in different places…because the thing too, is I think a lot of people think that even if the U.S. were to pass residence based taxation, that would just end all problems, but that’s not the case. The U.S. would still no matter what tax your U.S. source income.
And that’s the tricky thing is if you’re in the UK and then you move out, but you still have a UK rental income. Guess what? You’re still filing UK tax returns. So it’s not a problem that’s inherent just to Americans that live abroad. It’s a problem that is underlying in the international tax system of every country wants its piece of the pie. And it gets really complicated when you start getting different slices from different countries.
Carlie: Definitely. So let’s, I suppose, take your situation as an example. You’re living and working in Austria. Will you have to pay your taxes? Will you have to file in Austria and the U.S.? But do you have to pay tax to both Austria and the USA? Or is there a way that one gets cancelled out?
Nathalie: So I definitely have to file in both countries. And the answer to that if I pay in both countries is: generally not. So most countries will have a type of treaty with the U.S. so that there is no double taxation. It can happen, but for the most part, you will not pay to both countries. So like whatever income tax I do pay then to Austria, I can claim on my U.S. tax return. So that is generally a great benefit. And then it works other ways. Technically, if I have some type of U.S. source income, and I pay U.S. tax, I could technically claim that also on my Austrian tax return. And so double taxation should, in principle, not happen. However, in rare cases, it can, or maybe not even rare, but it can happen.
Carlie: And is it like if you like forget to check a box in your declaration, is that how it can happen?
Nathalie: If you don’t use the right tax benefits, yeah. So it’s a little bit more than checking a box. It’s…I mean, I guess it’s the equivalent of not filing a certain form. If you don’t file the right forms, it can happen. And that’s a big reason why I went out to build MyExpatTaxes is just because how’s the average person supposed to know which forms you include? A tax return can be anywhere from 10 to 100, 150, 200 pages. You don’t know every form that you need to file. And that’s not something that we’re taught, and that’s not something you just Google that easily. Because if you Google the internet…
Carlie: …it will tell you so many different things!
Nathalie: It’s like if you Google a symptom, the internet will tell you that you basically have the worst disease ever. And it’s the same with tax forms. If you Google one thing, you start getting all of these different interpretations, opinions, and you just see how wild the internet is. And to be fair, I’ve gone even on ChatGPT and I’ve tested the limits and I’m like, “that is not right.” And then I’ll be like, “ChatGPT, but what about this?” “Oh, yeah, you’re right. Ignore everything I just said.” I’m like, “okay, so you cannot just easily find it on the internet.”
Carlie: Nathalie, you built a whole business around U.S. tax filing. Does that mean you really enjoy this type of admin?
Nathalie: I don’t think anyone enjoys this type of admin. Maybe there are, but I’m not one of them. But what I do enjoy is solving these problems, right? And for me, it is a problem. It is an annoying problem, and it needs to be solved, and it needs to be solved in a way that is easy to understand as the end user, and also easy to understand as a tax preparer, and it needs to be standardized.
So my issue with all of this is that, like I said, there’s so many conflicting opinions and interpretations, because people read things differently, and my goal is to take something complex and standardize it, automate it, and also continue to learn to just make something complex easy. I think my answer in itself was honestly complex, so maybe I’m not, maybe…let’s see. I stop there, please continue. That’s what I like, solving these problems.
Carlie: So I’m guessing that if you are, say, living in Austria, earning income completely from Austria and not drawing any money from the USA in terms of rental income or having clients based in the States, that your U.S. tax declaration would be relatively easy to do. Would I be correct?
Nathalie: Not necessarily. So, you have to report all of your income. It’s not like the Aussie where if you don’t have Aussie sourced income, you just enter zeros. You report everything. You might not be taxed on everything, but you report everything.
In the easiest case, it would be, I have an Austrian employer and I have wages, and then I would report my wages, and then I would have to decide if I want to use the foreign earned income exclusion to exclude over 100k of that from U.S. taxation, or if I want to use the foreign tax credit approach to basically say, “this is all my income tax I paid in Austria, so I want to use it to offset my U.S. tax return amounts.”
So that’s the easiest case, and it obviously just gets more complex from there, and that is a big reason why people get a little bit lost because it’s not as straightforward as just saying, “okay, I use a certain tax benefit to get to zero taxation.” For example, if you had children under the age of 17 with a valid social security number, and you say, “well, I want to use the foreign earned income exclusion to just get to zero taxes owed,” you might be giving up $1,700 of a refund per child every single year.
Because you…that’s the thing is people also sometimes forget is, yeah, it’s annoying that you have to file U.S. tax return, even though you don’t live in the country. But guess what? If you’re eligible for a refund, they’ll give it to you. And so people…it’s really common…especially when COVID happened, we had these stimulus checks. And no matter where you lived in the world.
Carlie: U.S. citizen: you’d get a stimulus.
Nathalie: You’re a citizen. That’s your money, right? And so that was on one check that was…or on one return that would have been $1,800 on another return, that would have been $1,400 at a minimum. And then if you have children and you get this kind of family allowance benefit, so to say, that’s very common, and all the countries in the U.S. has it as well, you could really be getting up to $1,700 per child for the 2024 tax year that meets the requirements. And I think that is an amazing benefit. So yeah, filing is not fun, but of course, at least they also honour refunds.
Carlie: I know that tax filing opens in January, which is where we are recording this right now, and you have to do it by around April. Is there any benefit to getting your skates on and doing it in the first few weeks, or can you just drag it out?
Nathalie: Technically, expats can drag it out for quite a long time, but we’ll get into it. So, the first question: is it beneficial to file earlier? I think it is. So it really depends. Are you someone that normally owes U.S. tax, right? So they do have a lot of U.S. sourced income. Do you still have U.S. investments, U.S. rental income? Or in general do you have income that you’re not really paying income taxes to in your local country?
And…or, that is tax something might be then taxable in the U.S. One example is people that have a lot of income, maybe in, you know, an ISA in the UK, which would necessarily be tax free, or a TFSA in Canada, which would also be tax free. This investment income is just not tax free in the U.S., right? So you have to account for those things.
If you think you would owe U.S. tax, it’s always better to file by April 15, so you can at least know how much you pay. So even if you don’t hit the, “I’m ready to e-file,” because maybe I’m waiting on a few other documents. It’s always better to at least know, “okay this is what my estimated tax balance would be so that I can at least make an extension payment.” And so you can make an extension payment and that would mean that you don’t actually even have to file until October.
If you don’t think you owe any taxes, you could just wait until June. So June 15 is not…June 15 is the actual filing deadline for those that are abroad. I know…it just gets…there’s always these ifs, ands, and buts. But to summarize, if you think you owe tax: please file sooner than later, especially if you think you might need the help of a tax professional, because coming up to April, we are pretty much one of the only services that are still taking clients in at the very last moment, like all those people that come in literally the day of April 15th, we’re still trying to take in. However, most other firms will say, “the door’s shut, right?”
Carlie: “We were booked up before the season…”
Nathalie: They’re like, “we were booked up before 2025, all right?!”
Carlie: Here’s a question because I know in Australia, our tax year ends in June. And then the UK, I believe is a little…I think it’s around April, and then here in France, we’re declaring in May. So what if you’re living in a country that doesn’t have the same tax declaration period as the U.S.?
Nathalie: Yeah, so in this sense, like I said, it’s still better to model your tax return. So what we have people do is you obviously know how much money you made. From January to December. So the U.S. will record on the calendar year: January to December. And you of course, if you’re an employee, even if you’re self employed, you should have records of how much money you made.
You might not have all the deductions yet. You might not know the income tax paid yet, but you know how much you made. And so you should enter that at least in MyExpatTaxes to model your tax return. So you see what tax liability there might be. And of course, usually there’s income taxes already withheld at source. So like in the UK, that’s PAYE, and I think in Australia it’s also called PAYE (you know, ‘pay’ and then with an e: pay as you earn, right?). You obviously know how much was withheld. And so you can use those amounts to at least model a tax return. And then you can file a free extension with MyExpatTaxes to October. And then if…
Carlie: That’s where those extensions come in.
Nathalie: That’s where they come in, and a lot of people will do that. They’ll start their return on MyExpatTaxes, and then they’ll just see, okay do I owe tax? Do I not owe tax? If I have to make an extension payment or not? And then they’ll file an extension, and then really, the heavy crunching comes, I would say, more October. So October 15th is more of the unofficial real deadline for expats, because most expats will extend until October, just because of the things you said: they don’t have all their local tax documents yet.
Carlie: MyExpatTaxes, obviously it’s a platform to help you with your tax filing. I’m guessing there are many out there that U.S. expats could choose to use or many systems in general that U.S. citizens can choose to use to do their filings. How do you choose between them and what makes yours (probably sounds very obvious) what makes yours especially ideal for Americans living abroad?
Nathalie: Yeah so, I’ll give you the little story because we’re in a podcast. I’ll give you the little story of when I first moved abroad and I wanted to file my U.S. tax return. I was an employee of an international company, but still an Austrian company. It’s just Austrian wages. I just wanted to file. Easy, right? And I go and I try the most popular U.S. tax softwares in America, right? You know, starts with a T…blah, blah, blah.
And I try and I want to pull my hair out. I literally am so frustrated because it’s asking me five times, “oh, it looks like you might be living in Austria. Do you have international income?” I’m like, “yes, I told you that. I literally told you that! I told you that, right?” And then you have to enter everything in USD. It doesn’t really ask all the questions it needs to from a compliance standpoint. Not that you know that, right?
But now I know that it definitely doesn’t ask all the right questions. But with that being said, it’s so frustrating from like a user perspective. It’s just you’re trying to fit a square peg into a circle hole, and it’s just not working because this is built for Americans living in the U.S. that just have U.S. income.
And then you go to the next approach of, “okay let me try it some tax firm that’s advertising that they do expat tax services,” and those cost a lot of money. So even for the most simple tax return, you’re paying at least $500, but you’re not even just paying…the bill goes more towards $800 because you have a state return you have, your bank account filings and all of that.
And so this is my experience when I started and this is what started me to…this is what fired me up to say, “if nobody is going to listen to us 9 million Americans abroad and make this process easier, I guess I have to do it, right?” And then that was, back in 2017. So here we are. MyExpatTaxes is now the leading tax offer for U.S. expats and we just continue to grow to basically be the tax offer for anyone that has to file a U.S. tax return with international assets and income whether you’re in the U.S. or outside the U.S. and it’s because we focus on that aspect. We’re not trying to appease every American that lives in America.
We are doing the opposite. We are saying you ignored us. Completely, you ignored all of us expats. You said that you are a target market we don’t care about. So we’re not going to create anything tailored for you. And we said, no I care about my return. And I know that my American friends also have the same problem. So we created MyExpatTaxes to specifically solve this problem.
And so people coming in…it’s always so funny to me. Like we’ll have clients that write us support emails and “I’m so sorry my situation is so complex. I live abroad.” And I’m like, “we got you! We’re literally made for you. You are not complex. You are totally within scope and normal.” And I don’t know, I think that answers it, is we are made by expats for expats and we don’t see…there are 9,000,000 of us abroad. It’s not a small population. But of course, if you compare it to how many people are Americans live in America, yeah okay, it’s maybe not important enough for the big U.S. tax softwares to care about.
Carlie: At this point, Nathalie, is there a tax declaration situation that surprises you, or have you seen it all?
Nathalie: I’m not going to say I’ve seen all, because there’s some wild stuff that goes out there, but we’ve grown a lot. So when we had started MyExpatTaxes, we always said, “okay, we’re going to try for just, the simple cases of people that have a salary,” and then it just grew from there because people demanded this service. It’s not even that they want.
They demand that there has to be a service for them. And so now we can solve really very complex returns, right? Where you can be someone that just has a salary. You could be someone that has a UK company. You know, an Aussie company, you could be someone that has foreign trust, you can be someone that has foreign investments, it can be that you are making over a million dollars in a year. You can use us, we see it.
We see that whole spectrum of the person that is an English teacher somewhere for a year, we see that, we see people that are multi millionaires that maybe have stocks vested from U.S. companies, or they have these huge, foreign corporations, or that they have hundreds of foreign mutual fund investments.
So we’ve seen a lot. I’m not going to say we’ve seen it all. But what I will say is, every time people come in and they have something complex, we really do try to look at it. We really try not to ever push anyone away and we try to say, “okay let’s look at your situation and see can we somehow learn from it and automate it so that we can solve this for other people like you?”
Carlie: And in recent years, I imagine that the problem solving has really focused on digital nomads, Americans maybe setting up small businesses and choosing to work remotely.
Nathalie: Definitely. So that is a huge trend. And that’s also something that’s really cool with the U.S. tax code…
Carlie: You said cool and the U.S. tax code in the same sentence. What’s coming next?
Nathalie: I don’t know if anyone’s said that! But for those that are digital nomads, for those that are working remote, that is a very interesting benefit. If you are a W2 worker, right? And that just means you work for a U.S. company, right?
It’s U.S. company, you get a standard W2 form for it. If you are that, and then you’re working abroad, and you’re working abroad for over 330 days in a 12 month period, it is possible that you don’t pay any taxes on your income. Up to a certain point, right? So for 2024, that’s up to $126,500. And that’s because if you’re a digital nomad and you’re really hopping around and you’re not paying local taxes, but you’re not in the U.S. either, then you could potentially use the foreign earned income exclusion to exclude over 100K of income from U.S. taxation.
Carlie: That sounds nice.
Nathalie: That does sound nice, doesn’t it?
Carlie: And this is why people should get in touch with you to find out exactly how they do that.
Nathalie: It does sound nice. Most people will be probably registered in whatever country they’re working because even hopping around after a while gets a little exhausting.
Carlie: I could imagine. Yeah. “Hang on: how many months before I’m a tax obligated? Okay. Got to leave on this date.”
Nathalie: Yeah, it’s a little exhausting. Pack your bags. But with that even said, if…there are so many people that are self employed that use our platform. And I think that’s also a little bit the American spirit, right? Or it’s also moving abroad. I think any expat, you move abroad, it’s not like the local companies are handing you a job, right?
Sometimes they’re not handing you jobs, right? Maybe you don’t speak the language. For some reason, they don’t want to give you a visa. I don’t know. But it does end up that a lot of us expats end up being self employed. And then that is something that is important that you use the proper tax software to declare your self employment to the U.S. just because there’s a lot of things that can be missed.
If you use just the normal U.S. tax based softwares, you might be missing out on totalization treaties, which is, for example, if you live…if you’re self employed in the UK, you are paying into the UK’s self employment scheme, right? So that social health…social insurance, social security taxes, etc. If you don’t file your U.S. tax forms accurately, you could end up paying into the U.S. system as well at 15.3% of your net profit.
Carlie: Oh, that you’re not even using.
Nathalie: Yeah, it’s not a loss benefit. So there’s two ways for that. One is you could be overpaying into the U.S., even though you might not want to. And then at the other side…I don’t even get to the other side, but let’s just say if you use it, if you use a U.S. based tax offer and you miss out on that, you’re going to be paying more taxes than you necessarily have to. And so that is also important.
Obviously, if you then incorporate a company, you’re opening a rabbit hole of…there’s a lot of compliance forms that you need to file. And if you don’t file that, you could be facing tax bills of 10K per year. And I’m not even playing on the thing the IRS gets really crazy about some of their forms in which they deem you could be money laundering. I’m like, “I don’t think most expats are trying to money launder. I think they’re just trying to stay afloat where they’re living.”
Carlie: Okay, this segways pretty well into a question I had. I have heard this acronym in a previous career quite a lot. I’ve written about it. But for those unfamiliar, we have FATCA, and also we have FBAR, which is a new one for me. So what are they and why do we need to care?
Nathalie: Why we need to care, at least why Americans need to care, is because if you don’t file these forms, technically the IRS threatens that they could fine you $10,000 per form, per account, blah, blah, blah. I don’t know. The penalties are just unreasonable, but that’s why you have to care.
And what they are is basically saying that the U.S., to prevent money laundering, they have this rule that every financial institution out there in the world, if you want to do business with the U.S., then you better sign this agreement that if you have U.S. clients using your services, you will report all that information back to the U.S. Treasury.
And then on the flip side of that, because now the U.S. Treasury has all this information, they have a double reporting requirement where it says if you are a U.S. taxpayer and you have any foreign financial accounts, then you have to also report the information so that we can cross check to make sure that it matches.
And that is very frustrating because what that actually means is in addition to your U.S. tax return that you do every single year, you have to file a report called the FBAR report, and not everyone, but it’s…the threshold’s not so high, so you have to have, if you have a max combined…a combined maximum balance of over 10,000 U.S. dollars across all of your foreign financial accounts, even if only for a second in the year, you have to file this form, and this form is…there’s no tax calculated, but it’s like really, it’s pretty intense because it’s “okay, what’s your bank account? What is the address? How much was the maximum balance you had in that account? Who else owns the account?” And so it’s like a lot of this information.
Carlie: I’ve had to do this in France and it is painful because every single account’s like, when did you set it up? What is the address of the local branch? Which, you know, closed 10 years ago. I don’t know. I don’t know what branch I’m with anymore.
Nathalie: What was the original account number? I don’t know. 1? No, but of course we walk you through it and there’s options that if you don’t know all the information, there are options to say we always say you do the best you can, but at least submit something because if you submit nothing, you didn’t try, but if you at least tried, the IRS is actually very favorable in giving you exceptions if you’ve tried and showed in good faith.
Carlie: They allow you to make mistakes. Yeah, because it’s crazy the information they want. Now, this goes even more though, because I…it doesn’t stop there because it’s U.S. tax code. So it doesn’t stop there.
So there’s the FBAR. And then if you have over 200K, if you have more then you have to file the FBAR, but like a more expansive version. And that’s form 8938. And that’s in your U.S. tax return. And that is all of that, but then with 10 more questions attached to each account.
So to basically make it as complex as possible, what you end up doing is if you have filed a U.S. tax return, you usually have to file an FBAR, but you don’t file the FBAR with your U.S. tax return, you file this separately to the U.S. Treasury.
But then if you hit a certain threshold, you have to then include another version of the FBAR in your U.S. tax return, and it should match your FBAR. And this is why in MyExpatTaxes, we make sure that we handle all of this in one because that’s also the problem with a lot of U.S. based tax firms or even U.S. based tax accountants is they completely ignore this and it’s…even though the FBAR in the U.S. tax return is separate, they are actually connected. Nothing is really separate. Everything gets somehow filed to the IRS.
Carlie: I’m not doing this by myself. If I was an American living abroad, you’ve completely convinced me and I am using your website because my god, doing this alone would be so mind boggling, to put it politely.
Nathalie: It is. And I think, again, this is the whole thing of I really like to somehow make these complex topics simpler, and just a little bit more automated because, I mean come on, it should be right…in our age.
Carlie: Yeah, for sure. Nathalie, this topic comes up a lot in expat forums with regard to French declarations where we have to declare our bank accounts, much like American citizens do. Revolute. Wise. Online banks, paying with PayPal, where you have an account that you use to pay for things. Are they real bank accounts and do they need to be declared to the tax office?
Nathalie: So we generally like to be more conservative there and it is a bank account. I mean, you have an account number, it is technically sitting as a bank account, right? So what we say is if you’re using, for example, a Wise UK account, that is a foreign account, right?
If you have a wise U.S. account, and you have a U.S. bank account number and a U.S. bank, It’s most likely going to be a U.S. entity. You don’t have to report that. But if you’re using Wise UK, Wise France, and yes, that is a non U.S. account. If you’re using PayPal UK, etc., that is a non U.S. account. So that counts as a foreign account. And if you don’t necessarily have an account number, so PayPal doesn’t have an account number…
Carlie: On the screen, we’ve just had a virtual thumb appear. I know they have it in video conferencing…
Nathalie: Oh, look at that. It’s my thumb.
Carlie: Okay. Now I’m doing it too. Oh, no, mine’s not coming up. So mean! Back to…
Nathalie: Back to the topic! If you don’t have an account number necessarily, and you’re using your email for PayPal, we would say to use your email as an account number, as account identifier, right? Because at the end, what is an account number? It’s to identify the account you’re in, and an email is also similar, a username.
So we definitely encourage people to report those accounts because again, the penalty is just so high. So if you’re already reporting everything else, why don’t you just include these to make sure that you’re covering all your bases?
Carlie: I think a lot of people feel like it’s a gray area because you’re using PayPal, you’re using Revolut, you’re using Wise, and maybe it’s just to load money in and immediately pay for something with it, you may not be using it as a savings repository, and so in that case, is it really a bank account?
Nathalie: Yeah, but you could argue that about a normal bank account too, right? A checkings account that you just put money in.
Carlie: Depending on how much you spend every month, yeah.
Nathalie: Yeah, you could argue that about anything. There’s obviously a difference of…if you have a credit card, a credit card is not an account, right? This is just using it to link to a bank account, but these are accounts. And technically, if you think about it, Wise pays interest. I don’t think PayPal does. I don’t know how they got away with that, but every other one pays interest for the most part. So you could be still earning money on those accounts. And especially, Wise, Revolute, they’re paying interest: that is a bank account.
Carlie: All right. So always declare them even if you don’t think you need to.
Nathalie: I would say always declare them. Better safe than sorry. There’s no tax assessed on it. And what you just don’t want to deal with is the situation, especially for the U.S. side, right? I’m not on French law there, but for the U.S. tax law, it is very strict. And again, technically these fall under the definition of a foreign financial account. It’s in the…it’s being housed, not in the U.S., and it is a foreign financial account. You put money in it, and then you could be earning income on that money, and technically the money sits there. You have access to that money.
Carlie: So what are the penalties? One: if you do not file your U.S. tax return, and; two: if you don’t declare an account like one of these accounts because you think they’re superfluous.
Nathalie: So penalties, if you don’t file a U.S. tax return, it really depends. The general penalty is there’s a penalty on late filing and late payments. But that’s also if you don’t owe any tax, that means there is no penalty because the penalty is a percentage of your tax owed. So that could technically be no penalty at all.
However, if you had to include certain tax forms in there that you didn’t include, such as, these tax forms that are needed for foreign corporations, foreign trusts, That could be up to $10,000 per form missing. And we’ve seen those penalties. We will help our clients get out of them, of course. But we’ve seen those penalties pop up. So the IRS is pretty serious about it. It is not fun when someone sends you a letter saying you owe over $10,000 plus interest. That is not fun at all. No. So let’s…we try to avoid that and…
Carlie: Let’s just get our tax return done!
Nathalie: Exactly. And that’s the problem we have when people are not using the right system to file their tax return. And so the other part is if you have an FBAR and you’re not declaring all of your accounts, technically it could be up to 50% of the balance in that account. Or 10,000 U.S. dollars, so the smaller of those two, right? (Or actually, it might even be the larger of those two.) It’s a ridiculous amount.
The thing with the FBAR penalties is I’ve never actually seen it enforced. But just because I haven’t seen it enforced doesn’t mean that they’re not enforced. I would just say that in this realm where the IRS is still relatively lenient on it, if you haven’t been filing an FBAR, file your FBAR accounts and we have it in MyExpatTaxes too that you could just go through the delinquent FBAR submission procedure so that you basically get a clean slate.
You only have to file six back years. That sounds extensive, but it’s better than having to file 30 back years. And then the other part of it is if you made mistakes and you forgot something, amend it. Just amend the filing because what does it hurt? Except you know that it’s taken care of.
Carlie: 100%. So Nathalie, if Americans living abroad want to get through this tax filing season as smoothly as possible, where can they find you?
Nathalie: myexpataxes.com. There’s only one myexpataxes.com, right? I say that just because there are some tax softwares that now they know that we have a good reach, they try to go off the name. So…it’s fine. MyExpatTaxes.com. You can always email us at team@myexpattaxes.com or find us in all of our different social media channels. We’re everywhere. If you look for us, you’ll find us.
But we’re always there to help you, and whether you are in our little Facebook communities, because there’s a very lively chatty group of…and I think that’s a fun part with expats is you end up in these online communities. Whether you’re there, whether you are commenting on our videos on our YouTube videos or on Instagram, or you send us an email, we really do try to answer as many questions as possible because we know tax is so stressful and there’s just no reason it should be.
Carlie: Nathalie, thanks so much for coming on the Expat Focus Podcast to talk about how to have a stress free U.S. tax filing season.
Nathalie: Of course, I hope I helped and I didn’t make you all more stressed, because that was not my intention if I did. We’re here for you. Happy filing and thank you for having me on this podcast. It was so fun.
Carlie: That’s it for today. If you’re planning a move abroad, you should sign up to our monthly newsletter over at expatfocus.com/newsletter. It’s packed with really useful information, and you’ll also find out when our next episodes drop. If you love what we do here on the show, we’d love it if you left us a review on Apple Podcasts or however you like to listen. Remember to get in touch with us anytime over social media, we are Expat Focus, and I’ll catch you next time.