Filing US Taxes For Free when You Live Abroad

**DISCLAIMER: This option is only available if you earn less than $39,000 AGI (Adjusted Gross Income which will be explained further below).

This is my fifth year abroad and fourth year filing US taxes while living abroad in Spain. This is a trending topic this month as many US citizens abroad are facing questions on if, how and when should they be filing their US taxes. Let’s break it down by parts.

When do I need to file taxes if I decide to file?
This 2021 the IRS has extended the deadline for filing federal taxes to May 17th 2021. Many people do not know this but if you live outside of the US, you have an extended deadline of June 15th 2021 per the IRS website- section When to File. Typically, US citizens overseas get an additional two month extension however due to COVID, they extended the regular federal filing deadline a month and our deadline has remained the same.

Do I need to file? Should I file?
In theory, as a US citizen you are encouraged to file taxes every year whether or not you earn income. Why? Mainly because you are liable for penalties if they see you owe money and you do not declare it. Other strange reasons that may or may not apply to you?

*You want to come back to the US.
If you have not been filing taxes for several years in a row and now do with a full time job salary, you are more likely to have an IRS audit and will be liable for penalties for not filing on time.

*You want to bring your foreign spouse to the US and they need a US visa.
You will need to submit copies of your tax returns for the last three years.

*You want to buy a house or invest heavily in the stock market.
The US government might become suspicious on how that money was obtained and one of the ways to demonstrate where the money came from is through your US tax returns.

More long term complications…
*You want to go back to school or your children want to go to school in the US.
One of the components of being able to prove your need for finance assistance will be your tax returns.

Now for those who have earned a salary abroad, yes you must file if you answer yes to any of the questions below:

• Have you earned more than $400 USD as a freelancer (typically this is received in the form of a 1099)
• Have you had realized capital gains/losses in the form of stocks, cryptocurrency, profits from selling property?
• Have you received a W-2?
• Have you received income from rental properties?

If you have said yes to any of the above the answer is yes, it is illegal if you do not file.

How can I file for free if I earned less than $39,000 AGI last tax year?

First, let’s understand what AGI means. AGI usually includes gross income (income pre-tax), capital gains both cryptocurrency and stock market, bonuses, essentially anything you earned that year. If you have earned less than the number above congratulations! You are able to file for free at the link below. It includes a very easy guide of how to file tax as an expat.

https://freefile.intuit.com/ by TurboTax

I have used this for the last four years and I found it very user friendly. If you have any questions, please let me know in the comments below and I will be sure to get back to you!

Concepts to Understand

Foreign Earned Income Exclusion for US Expats
This means that all income that you earn abroad of $108,700 or less will be exempt from double taxation and being taxed in the US. This is available to people who:

•  bona fide resident – a person that lives outside of the US for an entire tax year.
• US citizen living in a foreign country(s) for 330 days or more.

Most Common Types of Tax Forms for Expats