Tax Tips for American Cryptocurrency Holders and Expatriates: Expert Advice on Filing Taxes

April was filing day in the United States, and to honor the occasion, we reached out to four tax professionals to gather their best tips for American cryptocurrency holders and expatriates. Robert W. Wood, a tax lawyer at Wood LLP, advised that individuals can file for an extension until October without increasing their likelihood of being audited. While the six-month extension does not extend the payment date, it can provide extra time to gather records, consider reporting alternatives, and seek professional advice. Wood argued that filing on extension may actually decrease audit risk, as returns filed hastily at the deadline could be more prone to errors.

Justin Wilcox, a partner at FML CPAs, highlighted the foreign earned income exclusion as a potential tax-saving opportunity for expatriates. If an individual’s income is foreign-sourced and they spend fewer than 35 days annually in the United States, they may be able to exclude up to $107,600 in wages from their federal taxes, along with a housing exclusion that varies by country. Wilcox emphasized the importance of meeting the tax home test, which requires having a regular place of business or employment in a foreign country and no U.S. abode. He also mentioned the physical presence test and bona fide residency test as options for meeting residency requirements.

Crystal Stranger, CEO of Optic Tax, cautioned against confusing the foreign earned income exclusion with the foreign tax credit. She shared her personal experience of utilizing the FEIE by spending at least 330 days outside the United States each year, maintaining tax residency only in the U.S. Stranger emphasized the importance of understanding the differences between the FEIE and FTC, as the latter offsets U.S. taxes with foreign taxes paid.

Overall, these tax professionals provided valuable insights for American cryptocurrency holders and expatriates looking to navigate the complexities of tax filing. By taking advantage of extensions, exclusions, and credits, individuals can potentially reduce their tax liabilities and ensure compliance with U.S. tax laws.