Is Overseas Tax Free Income Filed Upon Return?

When you make or hold money overseas, you may have to file the tax free income on return when the funds come back into the country. This process is known as tax deferral, and it allows you to make and hold money overseas without reporting the income to the federal government.

Risks of Deferral

Not all countries have tax treaties with the United States. If your income is held in a country without a tax arrangement, you may be breaking the law by deferring your taxable income. It is considered tax evasion to intentionally omit information from your tax return. Speak with your accountants regarding reporting overseas income to hear about deferral options and avoid criminal charges.

Benefits of Deferral

The primary benefit of deferral is it allows you to continue to do business with the money you are holding overseas for a period of time before taxing any income. This means you can reinvest funds and be taxed on the total income of your initial investment when you return the funds to the United States. Tax deferral may have additional benefits for Americans living abroad who wish to maintain citizenship within the United States but will have a hard time filing income taxes each year. 

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