# Could US expats be entitled to tax refunds?



## Editor

Americans living abroad may believe that paying income taxes to their host country is enough but it could actually pay them to file a US tax return as well, according to expat tax experts. The US is one of the only nations in the world that requires its citizens to file taxes on money earned [...]

Click to read the full news article: Could US expats be entitled to tax refunds?...
Please come back to discuss the story here in this thread.


----------



## Bevdeforges

OK, but before any of you US expats start planning how you're going to spend those refundable tax credits, do take a look at this: Earned Income Tax Credit Rules for Everyone

Turns out you can't claim the Earned Income Credit (and most of the rest of them) if you:
file a 2555 or 2555EZ form OR file as married, filing separately (relevant for those of us married to NRAs).
Cheers,
Bev


----------



## BBCWatcher

The Additional Child Tax Credit is probably the most interesting refundable tax credit to U.S. expatriates (with one or more children). The Making Work Pay tax credit is also interesting, but you'll have to file for past years (and soon) since that credit was recently discontinued.

Note also that the foreign earned income and foreign housing exclusions don't work with refundable tax credits. Take the foreign tax credit instead and see how that works. And note also that foreign tax credits can be "stored up" and used backwards and/or forwards in other tax years to reduce your U.S. tax liability in many cases.


----------



## Bevdeforges

Just be aware that if you revoke your choice to take the FEIE, and you then wish to make use of the exclusion within 5 years of your initial change, you have to formally apply to the IRS for permission to do so. Details are in Publ 54.

I also just checked the instructions for the form claiming the Child Tax Credit http://www.irs.gov/pub/irs-pdf/i1040s8.pdf It's pretty ambiguous in the wording, but it sure looks like the child you're claiming must be resident in the US for you to claim the credit. Maybe someone who has filed for this credit from overseas can let us know whether or not this is the case.
Cheers,
Bev


----------



## BBCWatcher

You missed something really important, Bev. Check IRS Form 1040 instructions, page 43, paragraph #3 at the top: "If your qualifying child has an ITIN instead of an SSN, file Schedule 8812."

You don't ordinarily file Schedule 8812 Part I to claim the CTC/ACTC. According to the instructions, you complete Part I only if you're listing a child with an ITIN. If your child has an SSN, you completely skip Schedule 8812 Part I, and thus the "U.S. substantial presence test" doesn't apply.

Note also the instructions for Schedule 8812: "Part I of this schedule is independent of Parts II–IV. Depending on your circumstances, you may need to complete Part I, but not Parts II–IV; Parts II–IV, but not Part I; or both Part I and Parts II–IV."

Parts II to IV of Schedule 8812 relate to the ACTC calculation.

Anyway, to net it out, the CTC/ACTC is available in many cases if you're living overseas. Your children must be living with you the majority of the time (as the IRS defines it), and they'll probably need SSNs rather than ITINs.

As a bit of trivia, there are U.S. nationals who are not U.S. citizens. Nowadays that's limited to people born in American Samoa and Swains Island, and people born to a U.S. national outside the U.S. who acquire U.S. nationality (on the basis of parentage). U.S. nationals can do everything U.S. citizens can except vote or hold elective office.


----------



## Bevdeforges

OK, but I'd still like to hear from someone who has actually received the credit - not just against taxes but as a refund - from overseas. Especially if they were backfiling and received it.

I don't keep up with that part of the tax code over there (no kids, and using the FEIE keeps my filings dirt simple). But I would think that it might draw IRS attention to your return. Still, if you can swing it - why not?
Cheers,
Bev


----------



## maz57

Those who are contemplating using the so called "Streamlined Procedure" need to be aware that attempting to claim any sort of refund may bump them into the "high risk" category. It says so right in the instructions.

Even those with benign facts who are doing a "quiet disclosure" to catch up with past filings may find claiming a refund isn't worth the few dollars to be gained. Just remember you've already got one strike against you (live overseas); why tempt fate by adding another strike (claiming refund)?

Meanwhile, refund fraud is rampant back in the homeland and the IRS seems unable to get a handle on it. Probably because they have all hands on deck going after overseas tax cheats (us).


----------



## BBCWatcher

I disagree with that at least a bit. If all your back filings show that you're owed a refund, and legitimately so, there's no late filing penalty even in ordinary circumstances. The IRS loves taxpayers that are owed refunds that don't file. They get to keep your money without paying interest, and they also might get to keep it permanently if you never file. Sure, the IRS might look a bit more closely at your returns, but they can't charge a penalty for late filing valid requests to get money from them.

However, you should worry about submitting a return that shows a refund _that you're not entitled to_. Don't do that.


----------



## johnmillsbro

Ok. Back again. So for 2009-2011 I streamlined using the FEIE for a net of zero taxes and zero refund. If you recall because my income was a scholarship and deemed "unearned" I was not able to go for the ACTC refund..but that is a different story....

For 2012 I have "real" income to report on line 7 (i.e a salary not a scholarship). Therefore, I will try to get the ACTC. Of course I will report back here how that goes....

I do have some related questions as I am trying to file online 

First: To be clear..Am I obliged to file the 2555 if we have foreign income? 

And related to original poster's questions. The online tax programs don't give you anywhere to report foreign income on line 7, unless you make a fake W-2 as BEV suggested. The only way I will be able to get the ATCT with the online programs is if I report my income as W-2 income. As its foreign income its not really W-2 income as its only reported to me by canada on a T4.... So are we sure a "fake" w-2 is ok? Won't they wonder if I go this route where my actual W-2 is???

If I don't make a FAKE W-2 my Line 7 income is zero. My income would only be shown on the 2555.....

Thanks 

John


----------



## Bevdeforges

johnmillsbro said:


> Ok. Back again. So for 2009-2011 I streamlined using the FEIE for a net of zero taxes and zero refund. If you recall because my income was a scholarship and deemed "unearned" I was not able to go for the ACTC refund..but that is a different story....
> 
> For 2012 I have "real" income to report on line 7 (i.e a salary not a scholarship). Therefore, I will try to get the ACTC. Of course I will report back here how that goes....
> 
> I do have some related questions as I am trying to file online
> 
> First: To be clear..Am I obliged to file the 2555 if we have foreign income?
> 
> And related to original poster's questions. The online tax programs don't give you anywhere to report foreign income on line 7, unless you make a fake W-2 as BEV suggested. The only way I will be able to get the ATCT with the online programs is if I report my income as W-2 income. As its foreign income its not really W-2 income as its only reported to me by canada on a T4.... So are we sure a "fake" w-2 is ok? Won't they wonder if I go this route where my actual W-2 is???
> 
> If I don't make a FAKE W-2 my Line 7 income is zero. My income would only be shown on the 2555.....
> 
> Thanks
> 
> John


You aren't obligated to take the FEIE (form 2555) but if you have eligible FEIE income and you elect not to take the exclusion, then you may be considered to have "revoked" the exclusion option and that can mean that you are ineligible to take it for another 5 years. (There is a way for you to ask permission to reinstate your FEIE option - check pub 54)

To file foreign earned income using one of the online tax programs, you need to file what's called an FEC (Foreign Employer Compensation) record. This is the "ersatz W-2" you need to assure that your foreign earned income shows up on the proper line (i.e. line 7) but that they don't attempt to match up the W-2 that you input in the program with a "real" W-2 received from a US employer.

Depends on which online program you're trying to use to e-file your returns - but not all of the e-filers can properly deal with FEC records.
Cheers,
Bev


----------



## johnmillsbro

Well I am probably returning to the US this years so I guess I'll be revoking it anyways? 

I also read on the an expat tax website that if you are filing as ( Married; filing separately) you can't e-file if your spouse is a NRA. Any truth to that?


Thanks Bev,

John


----------



## Bevdeforges

johnmillsbro said:


> Well I am probably returning to the US this years so I guess I'll be revoking it anyways?
> 
> I also read on the an expat tax website that if you are filing as ( Married; filing separately) you can't e-file if your spouse is a NRA. Any truth to that?
> 
> 
> Thanks Bev,
> 
> John


Haven't tried out that part of the three e-filing programs that claim to be able to handle my tax filing needs. So far, with the TurboTax program, you have to enter 000-00-0000 for the spouse's SSN though the system takes NRA in the other fields that ask for spouse i.d. information. Whether or not the system will actually allow you to e-file in that state, I have yet to find out.
Cheers,
Bev


----------

