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Can tourists claim taxes back on gambling winnings?

Can tourists claim taxes back on gambling winnings?

Published on April 28, 2025

Published by

Clark Stott

Reviewed by

Aya Takriti, EA

Table of Contents

Can I claim taxes back on gambling winnings in the US?

It depends on who you are. If you’re a US citizen or a Green Card holder who recently won big in a casino, then you will need to report your gambling winnings on your US federal tax return, it’s part of your responsibility as a US national.

So, can you claim taxes back on gambling winnings? Yes, you can either recover the taxes withheld from you by the casino or offset the winnings with gambling losses (if you have) to reduce the amount of tax owed.

Can foreign nationals or tourists do the same thing?

Foreign nationals or tourists can also have the chance to claim taxes back on gambling winnings, only in a different way. But most importantly, not all tourists can claim back taxes on their gambling winnings.

How are prize winnings taxed in the US?

For US persons, the IRS taxes 24% of their gambling winnings, and casinos will usually issue Form W-2G to them and the IRS to report their winnings.

The tax rate for foreign tourists is 30% of their gambling winnings, and casinos will issue them a Form 1042-S instead, which will include their casino winnings and the amount of tax withheld.

How do I claim my US gambling tax back from the IRS?

There are two ways:

  • Get a tax refund or;
  • Offset the winnings with gambling losses

Getting a tax refund

If you find that too much tax was withheld because you had significant losses, or your total income ended up in a lower bracket, you can claim a refund when you file your US tax return. This is just like when too much tax is withheld from your paycheck.

Deducting gambling losses

If you incurred gambling losses, you can offset them up to the amount of your winnings. So, if you lost more than you won, you can’t deduct the excess losses. This can only be done if you itemize deductions on your tax return; if you take the standard deduction, you cannot deduct gambling losses at all.

How can foreign nationals or tourists claim taxes back on gambling winnings?

Tourists will need to file a non-resident alien tax return (NRA) reporting their gambling winnings in order to claim a tax refund for taxes withheld by the casino.

As stated before, only some tourists can claim their taxes back on gambling winnings. Their eligibility will depend on whether their home country has a valid tax treaty with the US.

Here is the list of eligible countries that can claim back taxes on their casino or gambling winnings:

United Kingdom

Austria

France

Belgium

Germany

Czech Republic

Japan

Hungary

Italy

Ukraine

Russia

Iceland

Spain

Slovenia

Turkey

Slovak Republic

Netherlands

Bulgaria

Sweden

Lithuania

Ireland

Latvia

Denmark

Luxembourg

Finland

Tunisia

South Africa

  

Not all countries with a current tax treaty (e.g., Australia and New Zealand) can claim back taxes on gambling winnings because of the terms of their tax treaties.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

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Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

How to file a non-resident alien tax return

Here are the steps to file a non-resident alien tax return and get a tax refund on gambling winnings:

  1. Gather your documents: This will include your valid passport or ID and Form 1042-S
  2. Obtain an Individual Taxpayer Identification Number (ITIN): This will serve as your tax identity in the US, it’s important that you acquire this or you cannot proceed in filing your tax return.
  3. Download and complete Form 1040NR: This is the official tax return form for non-resident aliens (tourists). You can find it at the IRS official site.
  4. Submit and claim a tax refund: When you mail your tax return, you’ll need to attach your application for an ITIN and Form 1042-S to claim a tax refund.

What is the purpose of an ITIN?

An Individual Taxpayer Identification Number (ITIN) is issued to individuals who will pay taxes in the US but are not eligible for a Social Security Number (SSN). Foreign nationals or tourists will need to acquire this specific TIN in the US in order for them to file their NRA tax return.

How can a non-US citizen get an ITIN number?

Non-US citizens will need to acquire and complete Form W-7, the formal application for an ITIN, along with verified identity documents such as their foreign passport or driver’s license.

Form W-7 is attached and mailed together with your non-resident alien tax return (Form 1014NR). The process will generally take 6-12 weeks, during which time you will also get your ITIN.

FAQS

What is a US tax treaty?

A US tax treaty is a formal agreement between the US and another country that outlines how income earned across borders is taxed in order to prevent double taxation. The idea is that you should not be taxed on the same income twice.

Why are other tax treaty countries not eligible for a tax refund?

Every treaty is different. Just because your country has a treaty with the US doesn’t automatically mean you can get tax back on gambling. You have to check what the treaty actually says about “gambling income”; many treaties exclude it.

What happens if I forgot to file my US taxes?

The IRS offers a streamlined tax amnesty program for US citizens who have not filed their taxes in the past few years due to non-willful acts (e.g., forgetting to file). This program will eliminate your penalties and fees for not filing taxes, which can be a huge savings.

Can I hire a professional to assist with recovering my taxes?

Yes, you can hire a professional to help you get your gambling tax refund from the US. They can help you apply for an ITIN, file your tax return, and effectively maximize your tax treaty with the US.

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What is Form 8332?

What is Form 8332

Published on April 24, 2025

Published by

Clark Stott

Reviewed by

Deborshi Choudhury

Table of Contents

Can a noncustodial parent living abroad claim their child on a US tax return?

Yes, but they need to follow specific IRS rules. The key requirement is getting Form 8332 signed by the custodial parent, which gives the noncustodial parent permission to claim the child as a dependent.

Even if a divorce or separation agreement says the noncustodial parent can take the dependency, that’s not enough. The IRS needs a signed form—it’s the only document they’ll accept to approve the claim.

When is Form 8332 required and who qualifies to use it?

This form is used when the parents are divorced, legally separated, or living apart, and the child primarily lives with one parent (the custodial parent). To allow the other parent (the noncustodial parent) to claim the child, the custodial parent must sign Form 8332.

Here’s what needs to be true:

  • The parents live apart for at least half the year
  • The child spends more than half the year with one parent
  • The custodial parent agrees in writing to give up the claim for that tax year (or multiple years)

This is the case regardless of what a court order says. Without the form, the IRS won’t allow the deduction.

How do you complete and submit Form 8332 properly?

The process is straightforward but must be done carefully:

  1. Download the form from the IRS website
  2. Fill in the child’s name and Social Security number
  3. Add both parents’ names and SSNs
  4. Indicate whether the release is for one year or multiple years
  5. The custodial parent signs and dates the form

The noncustodial parent must then attach the signed form to their tax return. If they’re filing electronically and the software doesn’t allow uploading, the form must be mailed separately to the IRS.

For multi-year agreements, one form listing the applicable years is enough—but the IRS doesn’t accept photocopies for single-year releases.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

self-employed-eto

Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

Does a divorce decree override the IRS requirement for Form 8332?

No. A divorce or custody agreement—even one approved by a judge—is not valid proof for the IRS. The only way a noncustodial parent can claim the child is with a signed Form 8332.

If the custodial parent refuses to sign, the noncustodial parent can’t claim the child, even if the agreement says they should. In some cases, parents end up in tax court over this issue—but in the meantime, the IRS will stick to its form requirement.

What tax credits can the noncustodial parent get with Form 8332?

Once Form 8332 is properly filed, the noncustodial parent may be eligible to claim:

  • The Child Tax Credit (CTC)
  • The Additional Child Tax Credit (ACTC)
  • The Credit for Other Dependents, if the child doesn’t qualify for CTC

It’s important to note that some tax benefits stay with the custodial parent, even if they give up the dependency claim. These include:

In other words, the IRS divides tax benefits between parents. The form only allows transfer of the dependency exemption and related credits, not everything tied to the child.

What problems can happen if Form 8332 is done incorrectly?

This is one of those forms where mistakes can cause real issues. Some of the most common problems include:

  • Filing a return without attaching the form—this results in a rejected claim
  • Relying on a divorce agreement without the actual form—not accepted
  • Submitting a copy when an original is required
  • Not listing the correct years for multi-year releases

In any of these situations, the IRS may disallow the child-related tax benefits, and the noncustodial parent could face penalties or even an audit.

What if the custodial parent wants to revoke a past release?

Form 8332 also includes a section that lets the custodial parent take back the claim for future years. They’ll need to:

  1. Fill out Part II of the form
  2. Enter the year they want the revocation to begin
  3. Sign and date it
  4. Send a copy to both the IRS and the noncustodial parent

This only affects upcoming years. It doesn’t undo any tax years where the child was already claimed with permission.

If the parents don’t agree on the change, it may become a legal matter, but the IRS will follow what’s written on the most recent Form 8332 on file.

Why is this form especially important for expat families?

Living abroad can add complexity to tax filings, especially when children are involved and the parents are not living together. Form 8332 ensures that only one parent claims the child, avoiding IRS disputes or duplicate filings.

Because international custody arrangements often involve different legal systems, it’s essential that US expats follow IRS protocol—even if foreign courts or agreements say something different.

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What Are Qualified Education Expenses?

What are qualified education expenses?

Published on April 02, 2025

Published by

Clark Stott

Reviewed by

Aya Takriti, EA

Table of Contents

Qualified education expenses are costs that the IRS allows for tax benefits, such as tax-free withdrawals from 529 savings plans or education tax credits. These expenses must be necessary for a student to attend school, such as tuition, books, and housing.

Can US expats use qualified education expenses to deduct their taxes?

Yes, US citizens living abroad may qualify for tax benefits on education expenses. Two tax credits can help lower tax bills:

  • American Opportunity Tax Credit (AOTC) – This credit is for students in their first four years of college. It helps cover tuition, school fees, and even books or course materials. The AOTC can reduce the taxes you owe by up to US$2,500 per student, per year.

But what if you’re going to college outside the US?

The good news: some foreign colleges do qualify for this credit. However, the school must be approved by the US Department of Education for federal student aid programs. Not all international schools make the list—so you’ll need to check if the school is considered “eligible.”

  • Lifetime Learning Credit (LLC) – This credit is a little more flexible. It can be used for any level of higher education—college, grad school, or even job training. There’s no limit on how many years you can claim it, and it can help with tuition and fees (though not living costs or books, unless required by the school).

What if the job training or education is outside the US?

Same rule applies here: the school or program must be an “eligible educational institution.” So, if the training happens through a foreign school that’s approved by the US government, you can still claim the credit—even if the job opportunity itself is in another country.

Does qualified education expenses work when I’m living in the US but I send my kid out to another country?

Yes, you might be able to get a tax credit—even if your child is going to school outside the US.

But there are a few important rules:

  1. The school has to be on an approved list.
    The foreign college or university must be officially recognized by the US government. Not every school qualifies. But many well-known universities around the world are on the list.

  2. You’ll need records, not always a form.
    In the US, schools usually give you a tax form called a 1098-T, which shows how much you paid for tuition. Most schools outside the US don’t give out this form. That’s okay—you can still claim the credit, but you’ll need to keep your own proof, like tuition receipts and enrollment documents.

  3. Only certain expenses count.
    You can only claim tuition and school fees. Things like housing, travel, insurance, and food don’t count—even if they’re part of studying abroad.

  4. The student has to qualify.
    For example, with the AOTC, your child must be in their first four years of college and enrolled at least half-time (so not just taking a random online class).

What other tax credits are available for US expats studying abroad?

Student Loan Interest Deduction:

Allows taxpayers to deduct up to US$2,500 of interest paid on qualified student loans from their taxable income.​

  • Eligibility:
    • The loan must have been taken out solely to pay qualified education expenses.
    • The student must be enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential.
    • The deduction is subject to income limitations; for 2024, the deduction begins to phase out for Modified Adjusted Gross Income (MAGI) over US$80,000 (US$165,000 for joint filers) and is eliminated at US$95,000 (US$195,000 for joint filers).

This deduction is available regardless of whether you itemize deductions on your tax return.

Education Savings Bond Program:

Allows taxpayers to exclude from their gross income the interest earned on qualified US savings bonds when the proceeds are used to pay for qualified education expenses.​

  • Eligibility:
    • The bonds must be Series EE or Series I savings bonds issued after 1989.
    • The bond owner must be at least 24 years old before the bond’s issue date.
    • The proceeds must be used to pay for tuition and fees required for enrollment or attendance at an eligible educational institution.
    • The exclusion is subject to income limitations; for 2024, the exclusion begins to phase out for MAGI over US$96,800 (US$145,200 for joint filers) and is eliminated at US$111,800 (US$175,200 for joint filers).

529 Plans (Qualified Tuition Programs):

This is designed to encourage saving for future education costs. Contributions are made with after-tax dollars, but earnings grow tax-free, and withdrawals for qualified education expenses are also tax-free.​

  • Qualified Expenses:
    • Tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution.
    • Expenses for special needs services in the case of a special needs beneficiary.
    • Room and board, subject to certain conditions, for students enrolled at least half-time.

Some foreign institutions qualify as eligible educational institutions for 529 plan purposes. It’s best to verify the institution’s eligibility before making withdrawals.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

self-employed-eto

Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

Which education expenses are NOT qualified?

Not all school-related costs count as qualified education expenses. If you withdraw money for any of these, it will be considered a non-qualified expense, meaning you’ll have to pay taxes and possibly a penalty:

  • Transportation & Travel – Plane tickets, gas, or other travel costs to and from school.
  • Health Insurance & Medical Costs – Even if the school requires insurance, it is not considered a qualified expense.
  • Extracurricular Activities & Sports – Costs for joining clubs, teams, or activities that are not part of required coursework.
  • Non-Credit Courses – Classes that do not earn college credit, unless required for a degree program.
  • Personal & Family Expenses – Things like dorm room decorations, clothing, or other personal items.

What education expenses can be covered by a 529 savings plan?

A 529 savings plan is a special account that helps families save for education. The money grows tax-free and can be used for specific education expenses, including:

  • Tuition and Fees – The cost of attending a college, university, or other eligible school.
  • Books and Supplies – Textbooks, notebooks, and other materials required for classes.
  • Computers and Software – A laptop, educational software, or internet service if needed for schoolwork.
  • Room and Board – Housing and meals for students enrolled at least half-time. If living off-campus, the amount used must be within the school’s stated housing costs.
  • Special Needs Equipment – Tools or services required for students with disabilities.
  • K-12 Tuition – Up to US$10,000 per year can be used for private or religious elementary and high school tuition.
  • Apprenticeship Costs – Fees, supplies, and tools for registered apprenticeship programs.
  • Student Loan Repayment – Up to US$10,000 can be used to pay off student loans for the beneficiary or their siblings.

How do I calculate qualified education expenses?

To figure out how much of your education costs qualify for tax benefits:

  1. Add Up Eligible Expenses – Include tuition, fees, and materials required for classes. If using a 529 plan, also include room and board, a computer, and other necessary costs.
  2. Subtract Non-Qualified Expenses – Expenses like transportation, health insurance, and personal items do not count.
  3. Deduct Scholarships and Grants – If you received financial aid that does not need to be repaid, subtract it from your total education expenses.
  4. Check the Limits – Each tax credit or savings plan has rules on how much can be used for education each year.

What happens if I use education funds for non-qualified expenses?

If you use money from a 529 plan or other education savings for something that is not considered a qualified education expense, you may face financial penalties. 

The portion of the withdrawal that comes from earnings (not the original money you contributed) will be taxed as income, and you may also have to pay an extra 10% penalty.

However, there are some exceptions where the 10% penalty does not apply. These include:

  • If the student gets a scholarship that covers their tuition.
  • If the student attends a US military academy (such as West Point).
  • If the student becomes disabled or passes away.

If none of these situations apply and you spend the money on non-educational expenses, you will have to pay both taxes and the penalty when filing your taxes.

What should I do with unused education savings?

If you have leftover money, you have a few options to make sure it doesn’t go to waste:

  • Use It for Another Student – You can transfer the funds to a sibling, cousin, or even yourself if they still have education expenses.
  • Roll It Into a Roth IRA – If the 529 plan has been open for at least 15 years, up to US$35,000 can be moved into a Roth IRA for retirement savings (starting in 2024). Get specialist international US tax advice before investing into a Traditional or Roth IRA.
  • Pay Off Student Loans – You can use up to US$10,000 to help pay off student loan debt for the original student or their siblings.
  • Withdraw It for Other Uses – You can take out the money for anything, but you will have to pay taxes and a 10% penalty on the earnings portion.

If you don’t need the money right away, you can also keep it in the account in case the student pursues graduate school or another degree later.

What counts as a qualified higher education expense?

A qualified higher education expense is a necessary cost for college or university that education savings plans or tax credits may cover. These expenses include:

  • Tuition and Fees – The cost of attending an accredited school.
  • Books and Supplies – Any materials required for your courses.
  • Room and Board – Housing and meal costs, but only up to the school’s estimated cost for on-campus students.
  • Computers and Internet – If required for coursework, computers and internet services may be considered eligible expenses.
  • Student Activity Fees – If the fees are required for enrollment, they may qualify.
  • Student Loan Repayments – Certain tax benefits apply to repaying loans for past education expenses.

To check if your school qualifies, it must be an accredited post-secondary institution, which means it is officially recognized for higher education.

Schools outside the US may also qualify if they participate in the US Department of Education’s student aid programs.

How do qualified education expenses affect my taxes?

Using education expenses wisely can help reduce your taxes in different ways:

  • Education Tax Credits – The AOTC and LLC can lower the amount of taxes you owe when paying for school.
  • Student Loan Interest Deduction – If you are repaying student loans, you can deduct part of the interest from your taxable income.
  • 529 Plan Withdrawals – If used for qualified education expenses, money from 529 savings plans can be withdrawn tax-free.
  • State Tax Benefits – Some states offer tax deductions or credits if you contribute to a 529 savings plan.
  • Tax-Free Scholarships and Grants – Scholarships and grants usually do not count as taxable income if used for qualified expenses.

To claim these benefits, you may need to file Form 1098-T from your school or Form 8863 to report education tax credits.

Keeping records of your tuition payments and related expenses will help when filing taxes. However, if you’re unsure what applies to your situation, consider speaking with a tax professional who understands US expat tax rules.

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Section 962 Election

Section 962 Election

Published on March 28, 2025

Published by

Sparsh Ganeriwala

Reviewed by

Rose-ann De Villa

Sparsh Ganeriwala, an IRS Enrolled Agent with over 12 years of expat tax experience, specializes in filing US taxes for Americans living in Canada, US/Foreign Trusts, and GILTI Tax.

Table of Contents

[Section 962 Election] How can I mitigate double taxation on my foreign business income as a US expat in the UK?

If you’re a US expat living in the UK and running a business abroad, you might be worried about being taxed twice—once by the UK and again by the US.

The good news is that there are ways to reduce or even avoid double taxation. One option is making a Section 962 election, and another is using the GILTI high-tax exception. These are strategies designed to lower your US tax bill on income from foreign companies.

How does a Section 962 election work?

Here’s how it works: Normally, if you own a controlled foreign corporation (CFC), the US might tax you on that company’s profits—even if you don’t take the money out. But with a Section 962 election, the IRS temporarily treats you as if you were a US company. 

That means you get access to a lower tax rate (21% instead of your higher individual rate) and you can also use foreign taxes you’ve already paid to lower what you owe in the US.

To make this election, you’ll need to include it when filing your US tax return—specifically with Form 1040 and Form 8993. Many expats work with a qualified tax professional to help with this since the rules can get a bit technical.

Am I eligible to make a Section 962 election as a US expat?

Yes, most US expats who are shareholders in a foreign corporation may qualify. To be eligible, you need to be what the IRS calls a “United States shareholder.” This usually means you own at least 10% of a foreign corporation’s stock, either directly or indirectly.

How does a Section 962 election compare to other tax provisions?

A Section 962 election is a tax tool that can help US expats who own at least part of a foreign business. When you use this option, the IRS treats you as if you were a US corporation for that part of your income. 

This matters because US corporations pay a lower tax rate than individuals, and they’re allowed to claim credit for some of the foreign taxes that have already been paid.

This approach often makes sense if your business is in a country like the UK, where taxes are relatively high. If you don’t make this election, you might end up paying your regular US income tax rate on profits you already paid UK tax on.

There’s also the GILTI high-tax exception, which is another way to avoid being taxed again in the US. It works by excluding certain types of income from US tax if that income has already been taxed at a high enough rate abroad—usually at least 18.9%. 

Depending on your situation, one of these two options (Section 962 election or GILTI high-tax exception) may offer better tax savings.

Who can make a Section 962 election, and when?

Any US expat who owns shares in a foreign company can make a Section 962 election. This includes individuals, trusts, and estates. You don’t need to be a large business owner—even small business owners or freelancers operating through a foreign company in the UK can qualify.

To use this option, you must include the election with your US tax return for the year you want it to apply. It’s not automatic and doesn’t carry over to future years. So, if you want the same benefit next year, you’ll need to make the election again when you file that return.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file U.S. tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

self-employed-eto

Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

How do foreign tax credits interact with a Section 962 election?

If you’ve already paid taxes in the UK on your business income, you might be able to get credit for those taxes when filing your US tax return. A Section 962 election makes this easier, because it lets you use something called an “indirect foreign tax credit.” In simple terms, it means you can apply some of the UK taxes your company already paid as a credit against what you owe the IRS.

So, instead of being taxed again in full, your US tax bill could be reduced or even brought down to zero, depending on how much tax you paid in the UK. This can be especially helpful if you’re dealing with GILTI income, which normally would be taxed in the US even if it’s already been taxed abroad.

Missing the deadline means you can’t use the election for that year, which could leave you stuck paying higher US taxes on your foreign income.

What forms are involved in the process?

If you decide to make this election, you’ll need to file a few extra forms along with your regular US tax return (Form 1040):

  • Form 8993 – This helps calculate deductions related to your GILTI income (short for global intangible low-taxed income).
  • Form 1118 – This is used to report any foreign taxes your foreign company already paid, so you can potentially claim those as a credit.
  • In some cases, Form 8992 may also be needed to figure out how much GILTI you have to report.

You don’t have to fill these out on your own. Many US expats work with international tax professionals to handle these filings, especially since rules can change and paperwork can get detailed.

What are some real-world examples of a Section 962 election in action?

Let’s say you’re a US expat who owns a business in the UK through a foreign company, and that company makes US$100,000 in profits. The UK takes about US$19,000 in corporate taxes. Without a Section 962 election, the US could tax the full US$100,000 again at your personal rate—sometimes as high as 37%.

Now, if you use a Section 962 election:

  • You’re taxed like a US company, which pays only 21%.
  • The US lets you deduct half of your business income under the GILTI rule, so only US$50,000 is taxed.
  • You can also claim most of the UK taxes as a credit against your US tax.

End result? You might owe little to no additional US taxes. That’s why many expats consider this option if they own a profitable business abroad.

What are the tax benefits and drawbacks of making a Section 962 election?

Benefits for US expats:

  • Lower US tax rates – You’re taxed at the corporate rate (21%) instead of your personal rate, which is often higher.
  • Use of foreign taxes paid – You can claim a credit for some of the taxes your business already paid in the UK.
  • Possible tax savings under GILTI – You get a 50% deduction on certain income, which reduces your US taxable amount.

Drawbacks to consider:

  • Taxed again when you bring money home – If you eventually take profits out of the company as dividends, you could be taxed again in the US.
  • More paperwork – Forms like 8993 and extra calculations make tax filing more complex.

  • Some states might not follow the same rules – If you’re still connected to a US state, state taxes could still apply differently.

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Countries That Allow Dual Citizenship

Countries That Allow Dual Citizenship

Published on March 25, 2025

Published by

Clark Stott

Reviewed by

Jeff Patterson

Table of Contents

Which countries allow dual citizenship?

Many countries allow people to be citizens of two places at the same time. This means you can hold two passports and enjoy the rights of both countries. Some of the most well-known countries that allow dual citizenship include:

  • United States​
  • Canada
  • United Kingdom
  • Australia
  • France​
  • Switzerland
  • Italy​
  • Sweden​
  • Ireland
  • Portugal

The rules can be different depending on how you become a citizen. Some countries allow dual citizenship only if you were born into it, while others allow it through naturalization, marriage, or investment.

It’s always a good idea to check the specific laws before applying for a second nationality.

What is dual citizenship?

Dual citizenship means that a person is legally recognized as a citizen of two or more countries at the same time. This allows them to enjoy the rights and responsibilities of both nations, such as voting, working, and accessing public services.

However, it also means they must follow the laws of both countries, including legal obligations like taxes or military service.

How can I get dual citizenship?

There are different ways to become a dual citizen, depending on the country’s laws:

  • By Birth – Some countries automatically grant citizenship to anyone born within their borders (jus soli). Others give citizenship if at least one parent is a citizen (jus sanguinis).
  • By Marriage – Marrying a citizen of another country can help speed up the process of getting citizenship. Some countries allow spouses to apply for naturalization sooner than other foreigners.
  • By Naturalization – Living in a country for a certain number of years, following residency requirements, and proving language skills can make a person eligible for citizenship.
  • By Investment – Some countries offer citizenship in exchange for a large financial investment, such as buying real estate, donating to a government fund, or investing in local businesses.
  • By Descent – If a person’s parents or grandparents were born in another country, they might qualify for citizenship by descent (jure sanguinis).

Each country has its own rules, and some require proof of a clean criminal record, language proficiency, or property ownership.

What are the benefits and drawbacks of dual citizenship?

Benefits of Dual Citizenship:

  • Easier Travel – Having two passports can make it simpler to visit more countries without needing a visa.
  • More Work and Business Opportunities – You can live, work, and own property in both countries.
  • Access to Public Services – You may qualify for healthcare, education, and social benefits in both places.
  • Cultural and Family Ties – You can stay connected to both of your home countries and preserve your heritage.

Drawbacks of Dual Citizenship:

  • Taxes – Some countries, like the US, require citizens to pay taxes even if they live abroad.
  • Legal Responsibilities – Some countries may require military service or limit dual citizens from holding government jobs.
  • Conflicts Between Countries – If your two countries have political tensions, traveling between them might be difficult.

Which countries do not allow dual citizenship?

Some countries do not allow people to be citizens of two places at once. If you become a citizen of another country, you may have to give up your original nationality. The top 10 countries that do not allow dual citizenship include:

  • China
  • India
  • Japan
  • Singapore
  • Saudi Arabia
  • Indonesia
  • Ukraine
  • Austria
  • Netherlands
  • United Arab Emirates

In these places, having dual citizenship can lead to losing your original nationality, restrictions on owning property, or problems with visas and travel. Some of these countries make exceptions, but it’s important to check their rules before applying for another nationality.

Can I have dual citizenship in the United States?

Yes, the United States allows dual citizenship. If you become a citizen of another country, you don’t lose your US citizenship. However, there are some things you need to keep in mind:

  • Taxes – US citizens must file taxes every year, no matter where they live. This can create extra paperwork, but tax treaties with other countries can help.
  • Legal Responsibilities – You must follow the laws of both countries. This could include military service in some places.
  • Travel Rules – When entering or leaving the US, you must use your US passport, even if you have another one.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

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Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

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What are investment citizenship programs?

Investment citizenship programs allow people to become citizens of a country by making a financial investment. This is a legal way to get a second passport, which can provide benefits such as easier travel, better business opportunities, and access to more services.

How do these programs work?

To qualify for investment citizenship, individuals usually need to put money into the country in one of the following ways:

  • Buying Property – Some countries allow people to gain citizenship by purchasing real estate.
  • Donating to a Government Fund – A non-refundable contribution to the country’s national development program.
  • Investing in Government Bonds – Buying bonds that support the country’s economy.
  • Starting or Investing in a Business – Creating jobs or supporting industries in the country.

For example, Malta’s citizenship program requires both a government donation and real estate investment. Portugal’s Golden Visa offers a path to citizenship through property purchases or capital investments.

Another example would be:

  • St. Kitts and Nevis – A donation of at least US$150,000 to a government fund or a real estate purchase of US$200,000.
  • Vanuatu – A one-time donation of US$130,000 can grant citizenship.

How does dual citizenship affect US taxes?

If you are a US citizen and also a citizen of another country, you still have to follow US tax rules. The United States requires its citizens to report and pay taxes on all income, no matter where they live.

Do US dual citizens have to pay taxes twice?

Yes. If both the US and the other country tax the same income, this is called double taxation. However, the US has ways to reduce this burden:

  • Foreign Tax Credit – If you pay taxes in another country, you can subtract that amount from what you owe the US.
  • Foreign Earned Income Exclusion – If you live and work outside the US, you can exclude a certain amount of income from US taxes.
  • Tax Treaties – The US has agreements with many countries to prevent double taxation and clarify tax responsibilities.

What other tax responsibilities do US dual citizens have?

  • Reporting Foreign Bank Accounts – If you have more than a certain amount in foreign accounts, you may need to report them to the US government.
  • Green Card Holders – Even if you don’t have US citizenship, permanent residents (Green Card holders) still need to file US taxes.
  • Military Service – Some countries require citizens to serve in the military. This can be complicated if you are a US citizen as well.

What does it mean to have dual citizenship?

  • More Travel Freedom – A second passport can make travel easier by allowing visa-free entry to more countries.
  • Better Work and Education Options – Some countries allow only their citizens to work or access lower tuition fees in schools.
  • Access to Social Services – Dual citizens can use the healthcare system and other government benefits in both countries.
  • Cultural and Family Ties – Being a citizen of two countries allows people to stay connected to their heritage and live more freely between both places.
  • Financial Freedom – Dual citizenship can provide business and investment opportunities, making it easier to own property or start a company in either country.

However, dual citizens must also follow the laws of both countries. This may include:

  • Taxes – Some countries, like the US, require their citizens to file taxes no matter where they live.
  • Military Service – Certain countries require their male citizens to serve in the military.
  • Legal Responsibilities – Some jobs, especially in the government, may only be available to people who hold only one nationality.

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What is Tax Equalization

What is Tax Equalization

Published on March 20, 2025

Published by

Clark Stott

Reviewed by

Grace Lorraine Angeles

Table of Contents

How does tax equalization work for US employers and expats working abroad?

Tax equalization is a system that makes sure employees working in another country don’t pay more taxes than they would if they stayed in the US.

The company takes care of any extra foreign taxes and deducts a set amount from the employee’s paycheck, similar to what they would normally pay in US taxes. This way, employees don’t lose money just because they’re working abroad.

The company also handles the paperwork to follow both US and foreign tax rules, so employees don’t have to worry about it. This helps employees feel financially secure and makes it easier for companies to send workers overseas.

How does tax equalization work?

Tax equalization works by using a hypothetical tax system. This means:

  1. The employer calculates how much tax the employee would have paid if they had stayed in the US.
  2. That estimated amount (hypothetical tax) is deducted from the employee’s paycheck.
  3. The employer then pays the actual taxes owed in both the US and the foreign country.

This ensures that the employee’s tax burden remains the same, no matter where they work. It also prevents employees from paying double taxation, where they would be taxed in both the US and the country they are working in.

What are the benefits of tax equalization?

Tax equalization provides benefits for both employees and employers:

  • Fairness – Employees do not pay more (or less) tax just because they are working abroad.
  • Tax Compliance – Employers take care of tax payments, making sure taxes are paid correctly in both countries.
  • Encourages International Work – Employees are more willing to take foreign assignments without worrying about tax complications.
  • Better Financial Planning – Since employees pay the same amount in taxes as they would at home, they can plan their finances more easily.

Does tax equalization pose compliance issues?

While tax equalization makes things easier for employees, it can create challenges for employers:

  • Complex Tax Calculations – Companies must figure out the correct tax amounts for both the home and foreign country.
  • Changing Tax Laws – Countries change tax laws often, making it harder for companies to keep up.
  • More Paperwork – Employers must manage multiple tax filings, payroll adjustments, and international tax rules.

To avoid compliance issues, companies usually work with tax experts to ensure they follow all necessary rules in both countries.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

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Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

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How does tax equalization affect employee tax obligations?

For employees, tax equalization keeps taxes the same as if they had never left the US. This means:

  • Employees Pay a Set Tax Amount – The company calculates a fair tax rate based on what they would owe in the US.
  • Employers Handle Tax Payments – The employer pays the real tax owed in both countries.
  • Less Tax Paperwork for Employees – Employees don’t have to deal with complicated foreign tax returns because their employer takes care of it.

What is the employer’s role in tax equalization?

Employers manage tax equalization to make sure employees on international assignments pay about the same amount of taxes as they would if they stayed in the US. This prevents employees from paying extra taxes just because they are working in another country.

To do this, the employer:

  1. Calculates a “hypothetical tax” – This is the amount the employee would have paid if they never left the US.
  2. Deducts that amount from the employee’s paycheck – The employee pays the same tax they would have at home.
  3. Handles all actual tax payments in the home and host countries – The company takes care of the employee’s tax obligations in both countries by following local tax laws.

This reduces the tax burden on employees and ensures that taxes are paid correctly in both locations.

What challenges come with implementing tax equalization?

Even though tax equalization helps employees, it can be challenging for companies. Some common issues include:

  • Complicated Calculations – Employers must determine the right tax amounts for each country and adjust them if tax laws change.
  • Legal Compliance – Different countries have different tax rules, making it hard for companies to keep up.
  • Extra Costs – Employers may have to pay balance payments (differences in tax costs) and adjust payroll processing to follow international tax rules.

Because of these challenges, companies often hire tax professionals to handle tax equalization properly.

How can companies develop an effective tax equalization policy?

To create a fair and effective tax equalization policy, companies should:

  • Work with Tax and Payroll Experts – Professionals help ensure that tax equalization follows all international tax laws.
  • Keep Policies Updated – Tax laws change often, so policies should be reviewed regularly.
  • Communicate Clearly – Employees should understand how tax equalization works and how it affects their paycheck.

By following these steps, companies can reduce tax risks and make international assignments easier for employees.

What is the difference between tax equalization and tax protection?

Although tax equalization and tax protection both help employees avoid paying too much tax, they work in different ways:

  • Tax Equalization – The employee pays the same amount of tax as they would in the US. The employer covers any extra tax costs and keeps any tax savings.
  • Tax Protection – The employee only pays US taxes. If the taxes in the foreign country are higher, the company reimburses the employee for the difference. If the taxes are lower, the employee gets to keep the tax savings.

Employers choose the approach that best fits their company policies and budget. Tax equalization ensures fairness for all employees, while tax protection allows employees to benefit from lower taxes if applicable.

Tax equalization helps employees working abroad avoid unfair tax burdens while ensuring companies stay compliant with international tax laws. A

Although it requires extra effort from employers, it makes international assignments more attractive and financially stable for employees. 

If you’re working abroad and your employer offers tax equalization, it’s important to understand how it affects your paycheck and what tax responsibilities remain on your end.

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irs-form-5471

IRS Form 5471

IRS Form 5471

Published on March 13, 2025

Published by

Clark Stott

Reviewed by

Ankurita Lala

Table of Contents

Own a foreign business? You might need to file Form 5471.

If you are a US citizen, Green Card holder, or resident who owns or has control over a foreign business, you likely need to file Form 5471 with your annual tax return. This form helps the IRS track US taxpayers with business interests outside the country.

Filing Form 5471 is not optional—it’s required by US tax laws. Ignoring it can lead to high penalties, so it’s important to understand when you need to file and how to do it correctly.

  • Possible Tax Savings
    • Some US taxpayers can claim foreign tax credits for taxes paid to another country.
    • Filing Form 5471 properly may help you lower your overall tax bill.
    • A tax professional can help you explore legal tax planning strategies.

Why is Form 5471 required?

Form 5471 is a tax form the IRS requires US citizens and residents to file if they own or control a foreign corporation. It helps the IRS keep track of offshore businesses and ensures that US taxpayers are paying the correct amount of taxes on their foreign income.

The form is part of the US government’s effort to prevent tax evasion and improve transparency in foreign business activities. 

It also helps determine whether tax rules like GILTI (Global Intangible Low-Taxed Income) or Subpart F income apply, which can affect how much tax you owe on foreign earnings.

If you own 10% or more of a foreign corporation, you may have to file Form 5471 each year.

Who is required to file Form 5471?

Not everyone with a foreign business needs to file Form 5471. The IRS requires it if you meet certain ownership or control thresholds.

You must file Form 5471 if:

  • You own 10% or more of a foreign corporation (directly or indirectly).
  • You are a director or officer of a foreign corporation, and a US person has acquired 10% or more of the company.
  • You bought or sold shares of a foreign corporation, resulting in you reaching or dropping below the 10% ownership threshold.
  • You are a US shareholder of a Controlled Foreign Corporation (CFC)—a company where US persons own more than 50% of the total shares.

If you meet any of these conditions, you must file Form 5471 with your annual tax return.

Are there benefits to filing Form 5471?

  • Claim Foreign Tax Credits – If you already paid taxes to another country, you might reduce your U.S. tax bill through foreign tax credits.
  • Avoid Extra Taxes on Foreign Earnings – Certain types of foreign income, like GILTI (Global Intangible Low-Taxed Income) or Subpart F income, can be taxed differently. Filing Form 5471 ensures you pay the right amount and don’t overpay.
  • Plan Your Taxes Effectively – A qualified tax professional can help structure your foreign business ownership in a way that minimizes your tax burden.
  • Protecting you from IRS scrutiny – The IRS closely watches foreign business ownership. Filing Form 5471 shows transparency and helps avoid unwanted IRS attention.
  • Avoiding classification as a PFIC (Passive Foreign Investment Company) – If your business is wrongly classified as a PFIC, it could lead to higher taxes and more paperwork. Filing Form 5471 ensures your company is correctly classified.

What are the most common mistakes when filing Form 5471?

Many people struggle with Form 5471 because it has multiple parts and requires detailed information. Here are the most common mistakes:

  • Not filing when required
    • Some people don’t realize they need to file. If you meet ownership rules, you must file, even if the business makes no money.
  • Choosing the wrong filing category
    • There are different filing categories based on how much ownership you have in the foreign business.
    • If you pick the wrong category, you may miss required sections and face penalties.
  • Leaving out important information
    • Form 5471 has several sections (called schedules), and you must complete the right ones based on your ownership.
    • Missing required sections could trigger IRS penalties.
  • Incorrectly reporting your ownership percentage
    • The IRS needs to know exactly how much of the business you own.
    • If your ownership share is wrong or unclear, it can cause issues.
  • Filing late
    • Form 5471 is due with your tax return, usually by April 15.
    • If you file late, you can be fined thousands of dollars.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

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Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

When is Form 5471 Due, and can I get an extension?

Standard Deadlines:

  • For Individuals (US citizens and residents): April 15
  • For US Corporations/Partnerships: March 15

Can I get more time to file?

Yes. If you need extra time, you can request an extension:

  • Individuals can file Form 4868 for a six-month extension (new deadline: October 15).
  • Businesses can file Form 7004 for an extension on corporate tax returns.

However, extensions only give you more time to file the paperwork—they do NOT give extra time to pay taxes owed.

How does Form 5471 differ from Form 5472?

Form 5471 and Form 5472 both deal with foreign business interests, but they apply to different situations and different types of taxpayers.

  • Form 5471 is for US citizens or residents who own or control a foreign corporation. This form reports the corporation’s financial details, ownership, and income.
  • Form 5472 is for foreign-owned US businesses (or US businesses with significant foreign ownership). It reports transactions between the business and its foreign owners.

If you own part of a foreign company, you’ll likely need Form 5471. If you own a US business that has foreign investors or transactions, you may need Form 5472.

How do I file Form 5471?

  1. Find out if you need to file
    • If you own or control at least 10% of a foreign corporation, you likely need to file.
    • If you’re an officer or director of a foreign corporation and a US person acquires 10% or more of the company, you may also have to file.
  2. Determine your filing category
    • There are five categories based on how much ownership or control you have in the company.
    • Your filing category determines which parts of the form you need to complete.
  3. Complete the required sections (Schedules)
    • Depending on your category, you’ll need to fill out different sections, such as ownership details, income, and balance sheets.
  4. Attach Form 5471 to your tax return
    • If you’re an individual, include it with Form 1040.
    • If filing for a business, attach it to Form 1120.
  5. File it by the deadline
    • Form 5471 is due when your tax return is due, typically April 15 for individuals or March 15 for businesses.
    • If needed, you can request an extension using Form 4868 (for individuals) or Form 7004 (for businesses).

What are the different schedules of Form 5471?

Form 5471 has multiple sections (called schedules) that collect different types of information about the foreign business.

Common Schedules:

  • Schedule A: Lists company stock ownership.
  • Schedule B: Identifies all US shareholders.
  • Schedule C: Reports the company’s income statement.
  • Schedule E: Details foreign taxes paid.
  • Schedule F: Shows the company’s balance sheet.
  • Schedule G: Includes general business information.
  • Schedule H: Reports the company’s earnings and profits.
  • Schedule I: Summarizes the shareholder’s share of the company’s income.
  • Schedule J: Tracks accumulated earnings.
  • Schedule M: Lists transactions between the foreign company and US shareholders.
  • Schedule O: Reports new ownership changes or company restructurings.

Not everyone needs to fill out every schedule. The filing category determines which ones apply.

How do GILTI and subpart F income affect Form 5471?

If you own a Controlled Foreign Corporation (CFC), you might have to pay taxes on certain foreign earnings, even if you don’t receive them as payments.

Two key tax rules affect Form 5471:

  • Subpart F Income:
    • Covers certain types of passive income (like dividends, interest, and rents).
    • Requires US shareholders to report and pay tax on this income, even if the company keeps the money.
  • GILTI (Global Intangible Low-Taxed Income):
    • Applies to profits earned by a foreign corporation that exceed a certain limit.
    • Affects US shareholders of CFCs, requiring them to report some of the company’s profits as taxable income.
    • Introduced as part of the Tax Cuts and Jobs Act (TCJA) to prevent companies from shifting profits to low-tax countries.

Both Subpart F and GILTI must be reported on Form 5471, typically using Schedule I-1.

What are the penalties for not filing Form 5471?

  • US$10,000 Initial Penalty – If you fail to file Form 5471 on time, you automatically face a US$10,000 fine per year, per foreign corporation.
  • Additional US$50,000 Penalty for Continued Non-Compliance – If you still don’t file within 90 days of an IRS notice, the IRS can charge an extra US$10,000 for every 30 days you remain non-compliant (up to US$50,000).
  • Foreign Tax Credit Reduction – The IRS can reduce your ability to claim foreign tax credits, meaning you could owe more in US taxes.
  • Criminal Charges – In serious cases, willfully failing to file Form 5471 could lead to criminal penalties, including fines or even jail time.

These penalties add up quickly, so it’s important to file on time and ensure the form is completed correctly.

Can I avoid penalties even if I file late?

Yes, the IRS does offer options if you missed filing Form 5471 but had a reasonable reason for the delay.

Ways to reduce or avoid penalties:

  • Prove “Reasonable Cause” – If you can show that you didn’t file due to a valid reason (not willful neglect), the IRS may waive the penalties.
  • Use the IRS Streamlined Filing Compliance Procedures – This program helps US taxpayers who unintentionally failed to report foreign financial assets.
  • Voluntary Disclosure – If you come forward before the IRS contacts you, you may have a better chance of reducing penalties.

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How long does it take the IRS to process an electronic payment?

How long does it take the IRS to process an electronic payment?

Published on February 28, 2023

Published by

Clark Stott

Reviewed by

Grace Lorraine Angeles

Table of Contents

The time that the IRS takes to process electronic payments depends on which payment method the taxpayer uses. Here’s what to expect:

  • Direct pay: This is a bank transfer that is usually processed within 1 business day.
  • Debit or credit card payments: This can take 1 to 2 business days, depending on the payment processor.
  • Electronic Federal Tax Payment System (EFTPS): Payments scheduled before 8 PM ET on a business day are processed the following business day.
  • Same-day wire transfer: Generally processed on the same day if submitted before the bank’s cutoff time.

Where can I check the status of my payment?

You can check your payment status on the IRS website or through your payment channel’s payment history. If it takes longer than expected, you may need to contact the IRS or your payment provider.

What is the Electronic Federal Tax Payment System (EFTPS)?

The Electronic Federal Tax Payment System (EFTPS) is a free and secure system that allows businesses and individuals to pay federal taxes online or by phone. One of the main benefits of this payment channel is that there are no additional fees with 24/7 access.

EFTPS is provided by the US treasury, making the payment process faster and having immediate payment confirmation.

How do I enroll in EFTPS?

You can go to EFTPS official website to learn more. There is an enrollment tab in which you can enroll. You just need to provide your Individual Taxpayer Identification Number (ITIN), banking information, and other required details.

Once you’ve completed the process, you will receive a PIN via mail (within 5-7 business days) to activate your account. Then, once activated, you can schedule and manage payments online.

Does the IRS offer payment plan options?

Yes! Luckily, the IRS offers payment plan options for taxpayers who can’t pay their full tax bill immediately. There are short-term for less than 180 Days, long-term on an installment agreement, and an Offer in Compromise (OIC) if you can’t afford to pay your full tax debt.

You can set up a payment plan tool via the IRS Payment Plan Tool or call them at 1-800-829-1040.

How long does it take for the IRS to process an e-filed tax return?

E-filed tax returns are usually processed as fast as 21 days or earlier. Just ensure that there are no errors or additional reviews required from your tax return.

How long does it take to process a paper-filed tax return?

For paper returns, it can take approximately 4-6 weeks and longer during peak season. This is to say that the tax return has no errors as well and the IRS has no backlogs.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

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Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

How long will it take to receive my tax refund?

It also depends on how you filed and how you chose to receive your refund. You can review it here:

  • E-filed tax return
    • Direct Deposit: 21 days or less
    • Paper Check: 4-6 weeks
  • Paper-filed tax return
    • Direct Deposit: 4-6 weeks
    • Paper Check: 6-8 weeks

What can delay my tax refund?

Here are some things to review on your tax return to check the cause of the delay:

  • Filing errors (incorrect SSN/ITIN, missing information, computation mistakes)
  • Identity verification issues
  • Claiming certain credits (e.g., Earned Income Tax Credit or Additional Child Tax Credit may delay refunds until mid-February)
  • IRS audits or additional reviews

How long does an amended return take to process?

If you amended your tax return or filed Form 1040-X, the processing can take up to 20 weeks. So, it’s important to double check your information and the amounts to lessen the wait time and hassle.

How do I troubleshoot a rejected payment?

If your payment bounced or was rejected, check to see if you have insufficient funds, incorrect bank details, or a closed bank account. If all of these are fine, you need to resubmit the payment ASAP to avoid penalties.

If you’re using EFTPS, you can check for any errors in your online account before resubmitting.

I accidentally overpaid. How can I get a refund?

In this instance, the IRS will automatically refund overpayments if you don’t have any outstanding tax debt. If you don’t receive a refund, you can file Form 843 or a Claim for Refund and Request for Abatement.

For refund requests already over 6 weeks, you can call the IRS for further support.

My payment went through, but I was still charged a penalty. What should I do?

You can request a Penalty Abatement if the late payment was due to a reasonable cause (e.g., banking error, medical emergency). Additionally, you can file Form 843 or call the IRS to request penalty relief.

Who should I contact for specific payment issues?

Here are the available numbers you can call for specific issues:

Issue

IRS contact

Individual Tax Payments

1-800-829-1040

Business Tax Payments

1-800-829-4933

EFTPS Support

1-800-555-4477

Amended Return Payments

1-866-464-2050

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California tax relief

California tax relief

Published on February 26, 2025
by Clark Stott
Reviewed by: Aya Takriti

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.

Table of Contents

How can wildfire victims in California claim tax relief?

People affected by the January 2025 wildfires in Los Angeles County may qualify for tax relief, including extended deadlines, deductions for property damage, and other financial assistance.

The IRS and the California Franchise Tax Board (FTB) offer special tax provisions to help individuals and businesses recover.

Who qualifies for this tax relief?

If you live in or own a business in Los Angeles County, you automatically qualify for IRS disaster tax relief. If more areas are later declared disaster zones by FEMA, they may also receive tax benefits.

How do I claim a tax deduction for disaster losses?

If your home, car, or personal belongings were damaged in the wildfires and insurance didn’t cover everything, you may be able to claim a casualty loss deduction. To qualify:

  • Calculate how much your property was worth before and after the wildfire.
  • Subtract any money you received from insurance or disaster relief programs.
  • Your loss must be more than 10% of your adjusted gross income (AGI) to qualify for a tax deduction.
  • You must file IRS Form 4684 (Casualties and Thefts) with your tax return.

If you want a faster refund, you can claim the loss on last year’s tax return instead of waiting until next year. This is called a disaster loss election, and it can help you get money back sooner.

Publication 547 explains this in detail.

What other tax benefits are there for wildfire victims?

  • Extended Tax Deadlines – You now have until October 15, 2025, to file your 2024 taxes and make payments.
  • Penalty-Free Retirement Withdrawals – If you need money to recover, you may withdraw up to US$22,000 from your 401(k) or IRA without paying an early withdrawal penalty.
  • Property Tax Adjustments – If your home was damaged, you can ask for a property tax reassessment, which may lower your tax bill.

What help does the Employment Development Department (EDD) provide for businesses?

The California Employment Development Department (EDD) provides tax relief and financial aid to businesses affected by the wildfires.

What support is available?

  • Payroll Tax Extensions – If your business is in a disaster area, you may get an extra two months to file payroll taxes.
  • Disaster Unemployment Assistance (DUA) – If you lost work or had to close your business because of the wildfire, you may qualify for temporary unemployment benefits.
  • Emergency Help for Businesses – The EDD Disaster Services Unit provides financial assistance to businesses in Los Angeles and Ventura counties that were affected by fires and windstorms.

Businesses should contact the EDD for more details on how to apply for these programs.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

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How do the IRS and California coordinate tax relief for disaster victims?

The IRS and the California Franchise Tax Board (FTB) coordinate to make sure wildfire victims get the federal and state tax relief they need.

  • Deadline Extensions – Both the IRS and FTB have pushed tax deadlines to October 15, 2025, for affected individuals and businesses.
  • Automatic Relief – If your address is in a disaster zone, you don’t need to apply—the IRS automatically gives you extra time to file and pay.
  • State and Federal Tax Deductions – California offers additional tax deductions for disaster losses, separate from those provided by the IRS.
  • Tax-Free Disaster Assistance – If you receive FEMA aid or financial assistance, you don’t have to pay taxes on that money.

If you were affected by the wildfires, check the IRS and California FTB website or speak with a tax professional to ensure you receive all available benefits.

What are qualified disaster relief payments and are they taxable?

These payments can come from the government, employers, or charities, and in most cases, they are not taxable under Section 139 of the tax code.

What can disaster relief payments be used for?

  • Daily living expenses – Temporary housing, food, transportation, and other basic needs.
  • Home repairs – Fixing or rebuilding homes damaged by the wildfires.
  • Replacing household items – Furniture, appliances, and other belongings lost in the fire.
  • Medical costs – Treatment for injuries or health issues caused by the disaster.
  • Funeral expenses – Costs related to a death caused by the wildfire.

When are disaster relief payments tax-free?

  • If the government or a qualified organization gives you money to cover wildfire-related losses, you don’t have to report it as income on your tax return.
  • If your insurance reimburses you for a loss, the payment is not considered disaster relief and may be taxable depending on your policy.

These rules help ensure that financial help given to wildfire victims is not taxed, so you can focus on rebuilding.

What steps should you take to claim tax relief after a wildfire?

Step 1: Check If You Qualify for Disaster Tax Relief

  • If you live in or own a business in Los Angeles County, you automatically qualify for IRS tax relief.
  • If FEMA adds more areas to the disaster list, those residents may also get tax benefits.

Step 2: Claim a Casualty Loss Deduction

  • If you had uninsured losses, you might be able to claim a tax deduction for property damage.
  • Use IRS Form 4684 (Casualties and Thefts) to report losses and include it with your tax return.

Step 3: Choose Which Year to Claim Your Loss

  • You can claim your losses on last year’s tax return instead of waiting for this year’s filing.
  • This may get you a faster tax refund to help cover recovery costs.

Step 4: Consider Hardship Withdrawals from Retirement Accounts

  • If you need money, you may withdraw up to US$22,000 from an IRA or 401(k) without paying an early withdrawal penalty.
  • However, income tax still applies unless you repay the amount within three years.

Step 5: Seek Help from a Tax Professional

  • If you own a business, you might need help with disaster recovery plans and insurance claims.
  • Tax professionals can help you claim deductions and make sure you get all available tax benefits.

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What is Firpta?

What is Firpta?

What is Firpta?

Published on February 18, 2025
by Clark Stott
Reviewed by: Aya Takriti

Clark Stott has been with Expat Tax Online since 2015. Being a dual national based in the UK, Clark has unique experience helping US citizens (and Accidental Americans) become tax compliant via the Streamlined Tax Amnesty program. Clark likes to help Americans in the UK keep their tax situations as simple as possible to avoid harsh IRS treatment.

Table of Contents

How much tax is withheld under FIRPTA?

Under the Foreign Investment in Real Property Tax Act (FIRPTA), when a foreign seller sells U.S. real estate, the buyer must withhold 15% of the sale price and send it to the IRS. This is done to ensure that the seller pays any taxes owed on the sale.

Here’s how FIRPTA withholding works:

  • The buyer (not the seller) is responsible for holding back 15% of the total purchase price and sending it to the IRS.
  • This applies when a foreign person sells a US property or has it foreclosed or repossessed.
  • The seller might qualify for a reduced withholding rate if their actual tax liability is lower than the withheld amount.

If too much tax is withheld, the seller can request a refund by filing a US tax return after the sale.

Are there any exceptions to FIRPTA withholding?

Yes, not all real estate sales require FIRPTA withholding. Some transactions qualify for exemptions or reduced rates:

  • Low-cost home purchases – If the buyer plans to live in the home for at least 50% of the time for the next two years, and the sale price is US$300,000 or less, no withholding is required.
  • Reduced withholding with IRS approval – The seller can apply for a withholding certificate (Form 8288-B) to lower or eliminate the tax before the sale.
  • Nonforeign status certification – If the seller provides a Certification of Nonforeign Status, FIRPTA does not apply.
  • Certain corporate and investment transactions – Sales involving US corporations, securities, or like-kind exchanges may be exempt.

What types of real estate are subject to FIRPTA?

FIRPTA applies to most types of real estate and real estate-related investments owned by non-US citizens or foreign companies.

  • Homes, Apartments, and Rental Properties

    • If you sell a house, condo, or apartment in the US and you are a foreign seller, FIRPTA applies.
    • Whether the property is a vacation home, rental property, or investment property, withholding tax may be required.

  • Commercial Real Estate

    • Selling an office building, retail store, warehouse, or shopping center as a foreign investor falls under FIRPTA rules.
    • Even if you own the property through a company, the tax may still apply.

  • Land and Undeveloped Property

    • If you own vacant land, farmland, or development sites in the US, FIRPTA withholding may be required when you sell.
    • The sale is taxable even if no buildings or structures are on the land.

  • Real Estate Investment Trusts (REITs)

    • If you own shares in a US Real Estate Investment Trust (REIT), selling them could be subject to FIRPTA withholding.
    • REITs own and manage rental properties, so selling your shares in a REIT fund may be treated like selling real estate.

  • Shares in a US Real Estate Holding Company

    • If a foreign investor owns shares in a US company where more than 50% of its value comes from real estate, the sale of those shares may be taxed under FIRPTA.
    • This applies to corporations, trusts, and partnerships with significant US real estate holdings.

  • Other Real Estate Investments

    • Even if you are not directly selling property, FIRPTA may still apply if you sell an investment tied to US real estate, such as an interest in a real estate partnership or certain trusts.

What does this means for foreign sellers?

  • FIRPTA applies to most real estate sales by foreign individuals or companies, including homes, land, commercial buildings, and real estate investments.
  • If you sell US real estate, a portion of the sale price may be withheld to cover potential US taxes.
  • There are exemptions and ways to reduce withholding, so it’s best to consult a tax professional before selling.

Even if a seller is not directly selling a property, FIRPTA may apply if they are selling an investment linked to US real estate.

Why use the IRS Streamlined Tax Amnesty Program?

It’s for American citizens that didn’t know they had to file US tax returns each year, and have therefore fallen behind. Some more than 30 years! With the IRS Streamlined Procedure, say goodbye to overdue tax returns, late fees, and penalties.

Get a Quote
Learn More

self-employed-eto

Connect with over 10,000+ expats today!

Embarking on an international journey shouldn’t mean navigating the complex world of US taxation alone. If you’re living and working abroad, our friendly, supportive Expat Tax Online Help Facebook group is here to assist. We’ve designed a community that serves as a comprehensive guide and resource platform tailored for US expats.

Join Now, Free Forever

Who is required to comply with FIRPTA withholding?

FIRPTA rules apply to foreign sellers of US real estate, but buyers and other parties are also responsible for making sure the tax is handled correctly.

People and businesses that must comply with FIRPTA include:

  • Foreign sellers – Any non-US citizen or foreign entity selling real estate in the US must follow FIRPTA rules.
  • Buyers – The buyer (not the seller) is responsible for withholding and sending the required tax to the IRS.
  • Withholding agents – This includes real estate agents, attorneys, and escrow officers who help process the sale.
  • Qualified substitutes – In some cases, a closing agent or tax professional can act as a substitute to ensure FIRPTA compliance.

To complete a FIRPTA transaction properly:

  1. Foreign sellers need a tax ID number (ITIN or TIN) – The seller must provide a valid tax identification number for IRS reporting.
  2. Buyers must file the correct forms – Buyers must complete Form 8288 and Form 8288-A and submit them to the IRS.
  3. Sellers can apply for a withholding reduction – If a seller believes too much tax is being withheld, they can file Form 8288-B to request a lower amount.

Since FIRPTA enforcement has increased under laws like the PATH Act of 2015, it’s crucial to follow the rules carefully to avoid penalties, tax issues, or IRS audits.

How do I report and pay FIRPTA withholding tax?

It depends if you are the buyer or seller. The buyer is responsible for handling FIRPTA withholding and ensuring the correct amount is sent to the IRS. Here’s how it works:

  1. Fill out IRS Form 8288 and Form 8288-A – These forms document the sale and tax withholding.
  2. Send the withheld tax to the IRS – The buyer must send 15% of the sale price to the IRS within 20 days of closing.
  3. Provide Form 8288-A to the seller – This serves as proof that the withholding tax has been paid.
  4. Apply for a withholding certificate (if needed) – If the seller believes the amount withheld is too high, they can file Form 8288-B to reduce it.
  5. File a tax return to claim a refund – If the seller overpays FIRPTA tax, they can file a U.S. tax return to request a refund.

Because FIRPTA rules can be complicated, sellers and buyers are recommended to work with a tax expert to avoid mistakes, penalties, or IRS delays.

What are the penalties for not following FIRPTA rules?

If FIRPTA withholding taxes are not handled correctly, both the buyer and the person responsible for withholding (often the closing agent) could face serious penalties from the IRS.

Here’s what happens if FIRPTA rules are not followed:

  • The buyer could owe the full tax amount – If the required tax is not withheld, the buyer may be held personally responsible for paying it.
  • Interest and penalties will be added – If the IRS does not receive the correct withholding tax on time, interest charges and late fees will apply.
  • The IRS may place a lien on the property – If the tax isn’t paid, the IRS can file a claim against the property to collect what is owed.

Some common mistakes that can lead to penalties include:

  • Forgetting to withhold the tax – The buyer is responsible for ensuring FIRPTA taxes are taken out of the sale price before the seller receives payment.
  • Sending the tax payment late – FIRPTA taxes must be sent to the IRS within 20 days of closing.
  • Filing the wrong IRS forms – Forms 8288 and 8288-A must be completed correctly and submitted on time.

What is the role of a closing agent in FIRPTA transactions?

A closing agent (also called a settlement agent or escrow officer) helps handle real estate transactions and ensures that FIRPTA withholding tax is correctly collected and sent to the IRS.

The closing agent’s role in a FIRPTA transaction includes:

  • Checking if FIRPTA applies – They verify whether the seller is a foreign person and if FIRPTA withholding is required.
  • Collecting the withholding tax – If FIRPTA applies, they withhold 15% of the sale price and make sure it’s not mistakenly given to the seller.
  • Filing the required IRS forms – The closing agent submits Forms 8288 and 8288-A to the IRS and gives the seller a copy.
  • Helping with exemptions or reduced tax withholding – If the seller qualifies for an exemption or lower tax rate, the agent may assist with getting a withholding certificate.

Sometimes, a closing agent acts as a Qualified Substitute, meaning they certify that FIRPTA requirements have been met so the buyer doesn’t have to worry about withholding taxes.

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