New Bill Requires IRS to Create Short Form for Taxpayers Living Abroad
The bill would also expand the Foreign Earned Income Exclusion to include retirement income earned overseas.
New legislation, the Tax Simplification for Americans Abroad Act, would require the IRS to create a short-form certification for Americans living abroad who owe no U.S. tax and earn less than $400,000 annually.
The bill, H.R. 5432, introduced Wednesday by Reps. Don Beyer, D-Va., and Dina Titus, D-Nev., would also expand the Foreign Earned Income Exclusion to include additional types of income earned overseas, such as pensions and distributions from retirement funds.
The legislation would also “consolidate duplicative and burdensome forms” that taxpayers must file under the Foreign Account Tax Compliance Act (FATCA) and the Bank Secrecy Act.
The simplified form, according to the bill, would be “similar to Form 1040-EZ as it existed in 2017.”
“Ordinary Americans living abroad are often overlooked when U.S. tax policy is written, which can make it extremely difficult and expensive for them to navigate the tax system,” Beyer said in a statement.
The bill, Beyer said, “would help ordinary Americans fulfill their obligations without having to retain an expensive accountant to certify that they owe no U.S. taxes, and remove some of the frustrations faced by Americans living abroad who just want to follow the law.”
Titus, chair of the Americans Abroad Caucus, added in the statement that Americans abroad “face a uniquely complex set of reporting requirements that we here at home aren’t subject to.”
Taxpayers living abroad “shouldn’t have to jump through extra hoops simply because they reside or work overseas,” Titus said.
Jeff Bush of The Washington Update said that “tax simplification should be the goal of both parties and H.R. 5432 is a small and good step in that direction.”
Living abroad “makes tax filing confusing and difficult with a myriad of forms domestic filers remain blissfully unaware of,” Bush said. “For certain U.S. taxpayers living abroad, this effort will simplify the filing process dramatically by creating something analogous to the domestic 1040EZ return form.”
While there’s “support to pass this effort, … Given the recent inactions by Congress to make progress on a 2024 budget, it could get attached to a year-end omnibus bill,” Bush said.
Pictured: Rep. Don Beyer, D-Va.