Moving to or from the US: the tax checklist nobody gives you

Eric Newman, CPA3 min read

Moving to the US

• Determine your residency status. If a US resident, you will be taxed on your foreign income and assets. As discussed above, residency is important to determine what will be taxed in the US. You may still have foreign tax obligations as well. If you moved from a tax treaty country, treaty rules may be used to alleviate double taxation. You may also be dual status. There, the tax treaty has tie breaker rules.
• Apply for tax IDs and set up necessary accounts. Apply for SSN or ITIN, open bank accounts, set up IRS online account.
• Make a list of all worldwide assets and income sources. You will need to classify the type of income or asset for each and also identify the sourcing for tax purposes. This is needed to determine tax rates, credit amounts, and reporting obligations. Include (not exclusive) foreign bank accounts, investments, pensions, businesses, rental properties.
• File FBAR and FATCA if required. Besides FinCen 114 and Form 8938, also Form 3520 for foreign trusts and gifts and Form 8865 for foreign partnerships.
• State and local tax considerations. What is your state residency? What are the state filing requirements? Do you have income or residence in more than one state?
• Pre-arrival planning. Consider selling PFICs, revalue assets, review foreign retirement accounts, check exit taxes in foreign country.

Moving from the US

• File US taxes on time. You still have filing obligations for Federal tax return and applicable state and local taxes. You can get an automatic extension until June 15 if outside country on April 15 plus further extension can be requested to October 15.
• FBAR and FATCA. See above. Do this when you file your tax return. Note that the FBAR has an automatic filing extension until October 15.
• Know your tax residency. If resident in the foreign country and still US citizen you will have double taxation that you will want to avoid by way of any tax treaty available and the Foreign Earned Income Exclusion.
• If you earn income overseas, apply the Foreign Earned Income Exclusion. This is for non-US earned income. There are two tests to qualify for this exclusion:
  • Bona Fide Residence: full calendar year abroad. Whether you are a bona fide resident of a foreign country is determined by the facts of your situation and may include such factors as your intention or purpose for being in the foreign country, your activities in the foreign country, and whether you paid taxes to the foreign country, among other things.
  • Physical Presence Test: 330 days in 12 month period. This is simpler test but requires documentation showing days in and out of the foreign country.
• If self-employed, look at self-employment tax considerations. FEIE does not apply to self-employment tax. You will still owe SE tax to the U.S. unless you are working in a country with a totalization agreement. If the foreign country has a social security tax as well, there is a process to prevent double taxation by requesting a certificate of coverage from the appropriate agency of the foreign country. You will then attach a photocopy of the certificate or statement to your Form 1040 each year you are exempt from U.S. self-employment tax.
• If necessary, exit state tax domicile. This is only for California, New Mexico, South Carolina, and Virginia which have domicile rules that require formally severing ties. California, for example, is very aggressive. Expect an audit. The main theme though is closer connection as defined for tax domicile. What ties do you still have to California versus your ties with the new country.