Tips for Americans filing US taxes in Europe with IRS

Dear IRS…

Our taxes will not be late this year, I promise.

Fingers crossed.

Are you a fellow American expat? Check out what we did for filing our US taxes in Europe. Click to Tweet

Typically US taxes must be filed by April 15th, the day we almost always actually file our taxes since we’re procrastinators in a huge way.

This year, our official deadline for filing our federal taxes was automatically extended to June 15th, an additional grace period allowed for Americans residing out of country.  We also have to file Oregon State taxes, and even though we expect a small refund and aren’t sure if we need more time after June 15th for our state taxes, we know we need more time to file our federal taxes.

The reason?

For those who don’t know, American is one of only two countries in the world – the other being Eritrea – that double taxes its citizens on income earned while living abroad.  

So much for “no taxation without representation.”

I earned wages in the US for the first 6 months of 2014 and Travis earned wages in Switzerland for the second 6 months.  If we simply needed to file for my US wages, we could easily meet the deadline. But of course, it’s not that simple.

From what I read about our taxes this year, we can potentially receive a tax break and not be essentially double taxed if:

  1. We can prove we paid taxes in our resident country, Switzerland, which we have, and
  2. We can meet the “physical presence test,” meaning that we’ve been physically present in Switzerland for at least 330 out of the last 365 days.  We think this means we need more time to file because we’ve only been in Switzerland since July 6th, 2014 and we need to wait a full 12 months before we file.  Oh, and since we weren’t physically here the entire 24 hours of July 6th, technically our clock didn’t start ticking until July 7th.  

Gee golly, Uncle Sam.  You think of everything.

Still hopeful we could file our own taxes, I enjoyed a little light reading about:

  • international moving expenses, what forms are required to itemize deductions, and what we’re allowed to take as deductions;
  • our home we own in Oregon that counts as unearned income because we have renters, though we also pay a property management company, can deduct repairs and maintenance (more itemizing), and supposedly can “depreciate” the value of the house (???);
  • and about how state taxes differ in treatment of foreign income.

Somewhere in the midst of these volumes of painfully convoluted technical jargon, I heaved a huge sigh, uttered several choice expletives, and took the dog for a walk to calm down.  Obviously if filing taxes in the US can’t be easy, filing US taxes in Europe wouldn’t be either.

When I came back, I realized we were going to have to hire someone for our taxes.  My sanity simply would not survive filing our own taxes this year.

Death, taxes and childbirth! There's never any convenient time for any of them. ~Margaret Mitchell, Gone With The Wind Click to Tweet

Those in the US probably also aren’t aware of the recent complications for Americans filing abroad, particularly for expats here in Switzerland where there has been such a swarm of political tension and legal actions surrounding Swiss banking practices in recent years.

Switzerland is famous for its banking industry and client confidentiality, whereas the IRS is famous for rooting around in the darkest, most private corners of our lives to make sure we pay taxes regardless of where we live.  And rightfully so – just not double taxation.

In 2008 after one of Switzerland’s largest banks was found guilty of knowingly helping rich Americans hide billions in offshore accounts to avoid paying taxes, the IRS responded forcefully.  Our two countries have since signed a series of agreements that require greater transparency in banking, but the resulting backlash for expats is that it can be almost impossible for an American to open a Swiss bank account (as we found when we arrived) and we now have additional tax hurdles.

One of them is that we now have to file the FBAR – Report of Foreign Bank and Financial Accounts. Any US “person” (meaning citizen, resident, company, etc) that has over $10,000 in a foreign account at any time during the tax year has to file the FBAR.

It’s due by June 30th with no extensions allowed.

The good news is that the FBAR is an easy requirement for Americans filing US taxes in Europe even if the rest of your taxes are complicated enough to require a tax preparer.

As far as actually filing our taxes, it’s in the works.  A friend who’s a lawyer forwarded information for a couple of good firms in Oregon, and I contacted one other firm after reading good reviews about it online.

After these 3 separate companies came back with price quotes from $450 to $1800, you guessed it!  We opted for the least expensive company, which also so far has been a dream to work with.  They definitely made it a breeze for us filing US taxes in Europe.

So yes, our taxes will not be late this year, buuuut only because for the first year ever, we’ve hired someone to do them for us.

Our fear of running afoul of the American Internal Revenue Service, the infamous IRS, finally outweighed our need to save money (and pride) by doing them ourselves.

Here’s to hoping they’ll get us a bigger refund!

Planning to move overseas and wondering what it’ll cost, what you can ship, etc?  Head to our post above shipping our household goods from Oregon to Switzerland.

Know Before You File
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