Houston is an international city, with multinational executives, expatriates, dual citizens, entrepreneurs, and scientists located here. There are global entrepreneurs you may not have thought about, and foreign national workers living in your community.
However, if you have income, assets, or citizenship that cross countries, you have a tax situation that must also cross borders.
If you are a Houston resident earning money abroad, an international citizen with U.S. income, or a dual citizen living internationally, your tax situation is complex.
If you weren’t aware, the IRS and international tax authorities have specific reporting requirements for foreign income and foreign accounts/assets and not complying with them carries severe penalties.
This guide will clarify what individuals need to know about international tax for a Houston-based practice, including foreign income reporting, FATCA and FBAR compliance, and costly tax mistakes to avoid.
The guide discusses the 7 most important pieces of information for international tax for individuals in Houston to be aware of. Variables will include a specific international tax situation, exposure, or reporting or compliance strategy individuals will have based on prior experience.
Living Abroad? Here’s What That Means for Your U.S. Tax Responsibilities
Relocating internationally provides thrilling new prospects, but it doesn’t necessarily mean the potential for U.S. tax ramifications disappears.
The United States, unlike many countries around the world, assesses taxes based on citizenship and permanent residency, and not just where you reside.
That means if you are a U.S. citizen, green card holder, or dual citizen that is living elsewhere, you’ll most likely have an obligation to file an annual U.S tax return, although all your income is generated internationally.
This responsibility may feel overwhelming, but fortunately, the United States has multiple mechanisms available to help mitigate the risk of double taxation. With proper utilization, benefits like the Foreign Earned Income Exclusion or the Foreign Tax Credit could be available to you and significantly reduce (or even entirely eliminate) your U.S tax liability.
The real work is planning and reporting. Working with a qualified expat tax service in Houston can help ensure compliance and peace of mind, no matter where life takes you.
Foreign Income Must Be Reported
Any income you earn from foreign employers must be declared to the IRS, including income you may receive for operating or working performance abroad, and rental income from foreign properties.
Many taxpayers wrongly believe that because they paid tax in a foreign country on particular income, they do not have to declare it on their U.S. taxes. This is not the case, as all foreign income is subject to U.S. tax law reporting, regardless of the tax paid on that income to a foreign country.
This is where tax-saving strategies such as:
- The Foreign Earned Income Exclusion (FEIE)
- The Foreign Tax Credit (FTC), and
- Tax treaties between countries help to minimize the harsh consequences of double taxation, but you still have to file and properly disclose.
A Houston CPA for international tax will consider the sources of your income and develop the proper strategies to ensure compliance while minimizing your overall U.S. tax liability.
Dual Citizens and Green Card Holders Have Unique Filing Obligations
People who are dual citizens or green card holders will often get confused about taxes. The rule is simple: if you are a U.S. citizen or lawful permanent resident, you are required to file U.S. taxes each year, even when living outside the U.S. earning income.
You may be required to report on:
- Worldwide income
- Foreign retirement accounts
- International business interests
- Overseas rental property
- Non-U.S. bank accounts
Many dual citizens fail to recognize that even foreign pensions and non-U.S. mutual funds are subject to U.S. taxation and reporting.
This is why filing for dual citizenship taxes is so important. A Houston international tax advisor can provide you the dual citizenship tax filing help that may apply, which forms to file, and what you can do to avoid audits and/or penalties.
Non-Residents With U.S. Income Still Owe U.S. Taxes
The truth is that international tax law tends not to affect only Americans overseas but also non-residents with U.S. income.
Consider, for example:
- A foreign national parent who has rental property in Houston
- A foreign national who purchased stock of a U.S. company as an investor
- A global consultant who temporarily worked for a Houston resident client
- Unless a tax treaty allows a lower rate, these persons are generally subject to the 30% withholding tax provision on their U.S. high source passive income.
A non-resident could be liable to file the Form 1040-NR. They may need to apply for an ITIN (Individual Tax Identification Number) as well.
An U.S. tax help for non-residents in Houston could act on your behalf, in terms of possible deductions, the IRS, or any treaty benefits.
The Right Advisor Makes All the Difference
International tax law can be complicated and is always changing. Whether you’re facing an IRS letter, FBAR confusion, or pre-departure planning, a general CPA may not suffice.
Many high-net worth individuals, dual citizens, and expats ultimately turn to:
- An international tax advisor near me for pro-active planning
- A Houston CPA for international tax – for annual filing support
- An IRS foreign asset disclosure attorney for legal advice
From our perspective the best advisors will:
- Be able to customize a plan based on your citizenship, residency, and global assets
- Be able to file forms from how 1040, 8938, FBAR, and so on
- Be able to assist you with an audit or an IRS investigation regarding foreign assets
- Be able to help you mitigate double taxing with treaties and exclusions
Whether you are coming to the U.S., leaving Houston for an overseas work assignment, or making an international investment; the right team will allow you feel confident to tackle every nuance in a legal and right manner.
Final Thoughts
Houston has a diverse economy that connects residents around the world to international finance. International income brings international obligations, especially with the IRS involved.
Whether you need expat tax services, help with foreign income tax reporting, or legal advice with foreign asset disclosure, it is best to act early and use the services of a qualified advisor.
By understanding the 5 key things about international tax for individuals in Houston you can stay compliant, reduce unnecessary penalties and keep more of your income, wherever in the world it is earned.