# US tax software for expats?



## bajis

Hello,

Could someone recommend tax software that can be used to file US federal and state taxes?

I am a US citizen living abroad. I got my taxes done through a firm last year, but ended up spending a lot of time correcting their mistakes! I though I would give this a shot by using a software myself.

Should this not be the appropriate place for this post, please advice.

Cheers.


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## Bevdeforges

I've moved you over here to the expat tax section because your question is one that should interest most US expats around the world.

If you've got limited income (under $66,000 I think it is) and a fairly simple tax situation, you can use the Free File wizard on the IRS.gov website to find which Free File sites (and their software) is available to you. https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

Other than that, it's a matter of checking the various software companies to see which version of their software offers access to all the forms you need. Or, there is always the IRS Free File Fillable forms, which is basically do-it-yourself, but with some assistance for doing the math. (Ignore the thing on the Free File page that says Free File Fillable Forms is for those with income over $66,000 - you can use it at any income level as long as it has all the forms you need.)

Just a note, this year the NY Times claims that H&R Block software is the best by their evaluation, but they normally don't consider the expat audience. (H&R Block has an expat tax presence online.) Turbo Tax and TaxAct usually come out highly placed in most comparisons - but again, check which version suits your needs. Or go to the page that lists all the Free File members and see what their paid versions include.


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## byline

Just to add to what Bev wrote: I have a freelance writing business that, along with another part-time job, provides a meager income. When I first started doing my tax returns on my own, rather than through paid tax preparers, I tried TaxAct. But their result was that I owed self-employment tax for my writing business, even though the U.S. has a treaty agreement with Canada, and I had never owed U.S. taxes before (I owe, and pay, Canadian taxes on that business). A customer service rep informed me that there was a way to correct it, but it was more complicated than it was worth to make that go away on their forms, so I ended up filling out the forms myself.


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## andie17

I purchased H&R Block software for 2016, and there were numerous issues limiting its usefulness for expats, including the IRS rejection of two online returns, which I had never before or since experienced. I went back to Taxact and had no further problems. I have also tried Taxslayer, and it was okay, but not as intuitive (for me) as Taxact.

As to the comment from byline RE Taxact automatically requiring self-employment tax: any tax software will (or should) add SE tax if self-employed net income is $400 or more. The issue then becomes how to go about eliminating this tax liability.


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## Bevdeforges

The various tax programs vary from one year to the next. And I can't find the NY Times piece to see why they claimed the H&R Block program was this year's "best" - but IIRC they weren't evaluating things for expats, just for the domestic audience.

There are a number of issues with US tax filing software for expats. TaxAct actually does a nice job of preparing the filings, but there are little "glitches" in the IRS system that can reject forms that meet all of TaxAct's requirements. (Boy, don't I know that one!)

One other catch is that, if you use the Free File online system to do your taxes, some programs won't let you print a copy of your forms until after you've submitted them electronically. In many cases, it's a matter of "tricking" the software into getting all your numbers onto the correct lines - sometimes by creating a bogus 1099 or something similar. The US tax system just isn't set up for reporting "foreign" income, I guess.


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## byline

Bevdeforges said:


> And I can't find the NY Times piece to see why they claimed the H&R Block program was this year's "best" - but IIRC they weren't evaluating things for expats, just for the domestic audience.


Bev, is this the article you're looking for? Wirecutter is a division of _The New York Times_: The Best Tax Software


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## Bevdeforges

Yup, that's the one. It dawned on me that I had gotten the link from the NY Times but that it was on the Wirecutter site (except I couldn't remember the name of the site). Thanks for following up on that!


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## byline

You're welcome, Bev!


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## Moulard

byline said:


> Just to add to what Bev wrote: I have a freelance writing business that, along with another part-time job, provides a meager income. When I first started doing my tax returns on my own, rather than through paid tax preparers, I tried TaxAct. But their result was that I owed self-employment tax for my writing business, even though the U.S. has a treaty agreement with Canada, and I had never owed U.S. taxes before (I owe, and pay, Canadian taxes on that business). A customer service rep informed me that there was a way to correct it, but it was more complicated than it was worth to make that go away on their forms, so I ended up filling out the forms myself.


I suspect that you will find similar with many if not all tax software... that they are not really designed in a way to support treaty positions and the like without hacks of one type or another. 

After a couple of decades of paper based filing I actually moved to TaxAct about 4 years ago or so. I had gotten into a rhythm of paper based returns. I didn't even use free fillable forms because when they were introduced they did not cope with foreign addresses.

At the time I was doing tax planning, and wanted to run through a range of filing scenarios and model what things might look like in the future. 

Personally I chose TaxAct over some of the others because it allows me to run a downloadable copy of their software rather than doing it in their cloud which made that sort of modeling activity really easy and private. It also removed the risk of data breaches etc.


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## andie17

One positive development is Taxact now does support and offer treaty exemption for social security benefits. Hopefully in the near future this will extend to SE tax.


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## byline

Moulard said:


> I suspect that you will find similar with many if not all tax software... that they are not really designed in a way to support treaty positions and the like without hacks of one type or another.


True. I guess I thought that filing from a foreign address would at least cause a prompt regarding self-employment and the treaty. That much could be automated ... but it isn't.


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## Bevdeforges

No, none of the tax filing software packages deal with treaty items. There are just too many tax treaties. And honestly, the treaties don't really tell you HOW to report or file the various types of foreign income. Mostly just who ultimately gets to tax them (or tax them first).

With self-employment income, I'd take the FEIE approach and skip the Schedule C. I think that's what causes all the problems with the "self employment tax" - and if you're covered by the plan in Canada you're not subject to US self employment tax anyhow. Keep it as simple as you can.


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## byline

Thanks, Bev! That's what I've decided to do. I've not filled out Form 2555 since 2010 (or, rather, a paid tax preparer did it for me), but I think I've got it figured out. It's a lot more detailed than Form 1116. But because I was doing four iterations of form 1116, it was more cumbersome. Tax "reform" seems like a good time to change to the form that I probably should've been filling out all along.


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## andie17

I do like Bev's suggestion to keep it simple and use the FEIE to exclude the entire amount of self-employed income. However, where do you you report this income? It is still self-employed income and if you include it as self-employed income, you still have SE tax computed. You could lump this income in with other salaried income, and the end result is no tax owing either way, but I do not think that would be the correct way to do it.

From the IRS website: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

"Self-employment income: A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. The excluded amount will reduce the individual’s regular income tax, but will not reduce the individual’s self-employment tax."


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## byline

Whether it is the "correct" way to do it, I don't know, but I am combining the amounts and reporting as wages. As Bev points out, I am paying self-employment taxes here in Canada that have no relevance in the United States. After all, I am receiving T4 slips for both my regular wages and my freelance work for the newspaper. I very much doubt whether the IRS is going to pursue me for less than $3,000 in income ... especially since self-employment is exempt, as it covered by the U.S./Canada tax treaty, per this statement that has accompanied my previous filings:

"I am exempt from self-employment tax under IRC Section 1401(c), since I am subject to social security contributions and coverage in Canada under the Canada Pension Plan, and there is an agreement between Canada and the United States respecting Social Security taxes. This agreement became effective August 1, 1984 and has not expired. This statement is made pursuant to Rev. Proc. 84-54 and 80-56."


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## Bevdeforges

Andie, you have to realize that there is no one "right" way to do US tax forms. Given the number of options, elections and whatever that are intrinsic to the system, you make a "good faith" effort and get on with it. If you are not subject to self-employment tax, then there is no particular reason to report your self-employment income as a separate category other than salary (particularly as it's all excludable anyhow).

Many categories of income simply aren't covered in the US tax law, so you have to improvise as best you can.Don't hide anything, but if the IRS has a problem with how you've reported it, they'll be in touch. Chances are, if there is no effect on the taxes due, they won't bother.


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## bajis

Thanks for all the feedback. A few updates from my end that might help others:
- Based on this thread, I researched both TurboTax and TaxAct. I had to purchase TaxAct first before filling in the forms. TurboTax on the other hand gave me an option to play first and then pay. Given that this is the first time I am doing Forms 1116 and 2555 by myself, I decided to try TurboTax.
- At completion, TurboTax gave me the Premier option. You can find a $10 off coupon here which reduced the price to $69.99
- Everyone's situation would be different and there are multiple ways of doing this. But investing in Traditional IRA brought my tax obligation to $0.
- TurboTax was able to file my Federal taxes online. But since I had overseas income, it would not let me submit my Georgia state taxes. It would fill the appropriate forms for an additional $39.99 though... I decided against it as I'm familiar with GA state tax form. I plan to download, fill it myself and send it by mail instead (again, I didn't have to pay anything to GA.)


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## Bevdeforges

Were you able to open a Traditional IRA from overseas? (And just a note for those lurking, in order to contribute to an IRA, you can't use the Foreign Earned Income Exclusion for your earned income.)


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## bajis

Bevdeforges said:


> Were you able to open a Traditional IRA from overseas? (And just a note for those lurking, in order to contribute to an IRA, you can't use the Foreign Earned Income Exclusion for your earned income.)


Yes I was able to open a Traditional IRA account for myself.

I have a brokerage account with AmeriTrade for trading stocks/mutual funds. My wife already had an existing Traditional IRA account and we had linked both of them (she contributed $5,500 for 2018 into this account.) I opened a new Traditional IRA account and added it to the same profile. All of these accounts have my sister-in-law's MI address - perhaps that's why it was possible for me to open a new one from Australia.


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## Peasant

bajis said:


> Could someone recommend tax software that can be used to file US federal and state taxes?


Turbo Tax works well and you can pay for it and download it from their website.


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## Nononymous

Somewhat off topic but apparently one of the virtues of filing paper returns (even if generated by software) is that the IRS doesn't seem to be capable of entering data for certain investment-type things, so it can't match up tax return information against FATCA reporting. Well done!


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## Booth44

Just a heads-up for expats like myself who use of TaxAct. I tried to take advantage of their Black Friday pre-sale and was unable to purchase the software because I don't have a credit card from a US-based bank. I verified with their customer service rep that this was indeed their new policy. So after many years of being a loyal TaxAct customer it looks like I'm going to have to find a new software provider. Not looking forward to it!.


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## Bevdeforges

Are you looking to buy the downloadable software or were you planning on using their online service? (Probably applies to both, but you never know with these things.)

Unfortunately it will probably be the end of January before the Free File section opens up on the IRS website. Even if you're not eligible to Free File, you can usually at least determine which of the available Free File vendors can deal with overseas taxpayers (normally no more than about 4 or 5 of them).

The other option is to use your prior year returns as a model and go with the Free File Fillable forms option. (Don't believe the stuff on the website about Free File Fillable being only for those with > $69,000 in income.)


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