Now is the time for all Americans to perform their annual civic duty and file their tax returns. The United States, unfortunately, remains the sole Western nation to impose its taxes on worldwide income, regardless of where you live.
Thanks to the government shutdown, the start of the filing season was delayed until January 31st this year (2014). For those of us who live outside the US, there remains an automatic 2-month extension until June 15th to file your tax return. Be warned, however, this is not an extension of time to pay: to avoid penalties the deadline remains April 15th. Those who feel they need more time can apply for an extension, until October 15th.
The personal exemption, standard deduction and tax rate tables have been adjusted for inflation, as has the maximum contribution to retirement accounts. The average exchange rate used for converting euros into US dollars, as published by the IRS, is 0.783 for 2013.
Filing thresholds have also gone up. A single taxpayer can now make up to $10,000 and not file a tax return. There are different amounts if you’re married or over 65; see the table below for filing thresholds.
The foreign earned income exclusion inched up to $97,500 for 2013. Remember, though, you need to file a return in order to claim the exclusion.
New taxes were added to the “rich.” A new tax rate of 39.6% was added for those at higher incomes – $400,000 for single filers, $450,000 for married couples filing jointly and $425,000 for heads of household. Itemized deductions and personal exemptions are also phased out at high-income levels, and capital gains taxes increase to 20% for some taxpayers. There’s also been a 0.9% Medicare tax and a 3.8% tax on investment income added for high-wage earners.
Another item new for 2013: same-sex couples who are married will have to choose married filing jointly or married filing separately when doing their tax returns. The marriage must be legal in the state or country in which it was performed. This includes France, which in 2013 recognized same-sex marriages.
The IRS processed more than 147 million tax returns in 2013, down slightly from the previous year, and more than 109 million taxpayers received refunds that averaged $2,744, also slightly less than in 2012. As of February 21st 2014, the IRS has received over 46 million tax returns, up 1% from the same period last year.
American Tax Consultant George Donnelly (www.donnelly-cpa.com – 06 79 27 92 60) is a Member of the American Institute of Certified Public Accountants, Licensed by the State of California.