US expats: Beware of these hidden costs when filing your 2018 tax return
Filing your 2018 US tax return from overseas? Understand the hidden costs involved in transfers of US dollars.
There are two things that are guaranteed in This American Life: taxes, and the fact that you have to pay them.
The consensus seems to be when it comes to tax and your money, people want to keep things fair.
When President Donald Trump introduced the 2017 Tax Cuts and Jobs Act, a Reuters poll showed that three-quarters of Americans surveyed favoured wealthier Americans paying more tax.
Looking to Europe, a 2018 Eurobarometer survey reported that 74% of Europeans believe the fight against tax evasion and tax fraud should be prioritised by the EU.
CurrencyFair want to share a third universal truth - how saving on money transfers of US dollars can make paying your taxes that bit easier to endure.
Filing a tax return
The process of completing a tax return is generally an unpleasant affair. Filing your tax return is accompanied by a dread-inducing feeling reserved for that long overdue dentist’s appointment.
But putting off the inevitable has its consequences.
No matter where you are in the world, US nationals face penalties that the Internal Revenue Service (IRS) can levy for failure to file taxes.
Failure to file
If you are a US expat living overseas, you are obliged to file taxes with the US government, even if you are 100% confident that there is no tax due to be paid by you.
Failure to file means you could end up paying more than you expected. You are liable to pay a penalty should you fail to file your tax return or pay any taxes owed by the filing deadline.
Fail to file by the tax deadline? For each month or part of a month that your tax return is late, the IRS charge a penalty of 5% of the unpaid taxes.
Fail to pay your taxes owed to the IRS by the tax deadline? There is a penalty of a half of one percent of the unpaid taxes for each month or part of a month after you have missed the tax-filling due date.
No penalties will incur until after June 15th, but interest on the taxes due will begin as of April 15th.
Preparing a tax return is anxiety-inducing, even among the well-organized: the results may show there was an underpayment where tax is due, or an overpayment, which means a welcome tax refund.
As the tax collection agency, the IRS website is the ultimate resource on how to file your 2018 tax return from anywhere in the world.
Got it, I need to file. How much time is left to file my 2018 tax return?
The 2019 deadline for a US national filing their 2018 tax returns from overseas is June 15, 2019.
The deadline for all other US nationals is April 15, 2019.
That means American expats have an extra two months of tax-induced purgatory to navigate each tax season when you live overseas. But what you decide to do with all this extra time is important.
Even if you can’t stand the process of filing, and dread to see the final numbers on the IRS scale, use your extra extension time until June 15, 2019 wisely:
find the cheapest way to transfer the US dollars you may need to send home.
How to avoid extra fees and charges on money transfers of US dollars
By researching the extra fees and charges you could be paying when sending US dollars to the USA, you can save money on the cost of your wire transfer.
Before you complete a wire transfer of US dollars, you’ll want to:
Research the fees your bank will charge you for the online money transfer
Compare the exchange rate being offered at the time of the transaction with the currency market rate
Consider any additional intermediary and recipient charges by your bank to complete the transfer
Why is a money transfer so expensive?
Most banks and providers take what the currency market rate is and add a mark-up to it to calculate their own exchange rate.
This is where the process of money transfers gets unfair.
They don’t tell you about this mark-up, which means you can end up paying up to 3%-6% more in extra fees and hidden charges. When exchanging your money, however, they usually only tell you about the transfer fee charged.
If using a bank outside the USA to transfer US dollars, you can be making an international wire transfer without realising it and end up paying additional fees, which means an unfair charge for you to just send your money to another bank account. Talk about adding insult to injury.
At CurrencyFair, we keep things simple.
How you save on a US dollar transfer with CurrencyFair
When completing an international wire of US dollars with CurrencyFair you save money on:
The exchange rate - CurrencyFair is fair and transparent about our rates and fees. You can exchange your money at rates that are up to 8 times cheaper than a typical bank. Simply fair.
The fee to transfer - US$4 to transfer out US dollars, no matter the transfer amount. Simply transparent.
Best of all, you avoid excessive fees and charges – we introduced a new banking partner for domestic deposits of US dollars which means an end to paying the middleman when you deposit US dollars into our new CurrencyFair account.
At CurrencyFair our focus is to provide better value and a superior service.
CurrencyFair has an ‘Excellent’ rating on independent review site Trustpilot with a rating of 9.4 out of 10. So when you exchange US dollars with CurrencyFair there is the added bonus of our world-class customer experience team, on hand to assist with any issues. That’s just part of the service.
The extended US tax deadline of June 15, 2019 for US expats allows time to not only prepare a 2018 tax return, but the time to find the cheapest way to transfer US dollars.
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from CurrencyFair Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
The best way to send money to India from the UK
October 19, 2020
July 5, 2019
November 18, 2019