All U.S. Citizen you are required to file a U.S. Individual Tax Return every year, wherever in the world they live, reporting your worldwide income, even if you pay taxes in Spain. You must file the Form 1040 (Federal Income Tax), if your gross income is at least $5 (married filing separately) or $12,400 (single). Tax Day is Thursday, April 15, 2021. You must file your 2020 US Tax Return by this date! Expats have an automatic filing extension until June 15th, with a further extension available until October 15th upon request that we ask for automatically for all our clients for free.
You must also file the FBAR (Foreign Bank Account Report) with the Financial Crimes Enforcement Network, FINCEN 114 before June 15th 2021, if the aggregate amount of all the maximum balances of your financial accounts outside the US, reach the amount of $10,000 at any point during the year 2020.
Update for this year on Form 1040 2020
Here are the main things you need to know right off the bat for the 2020 US Tax Return:
- Tax Day is Thursday, April 15, 2021. You must file your 2020 US Tax Return by this date! Expats have an automatic filing extension until June 15th, with a further extension available until October 15th upon request that we ask for automatically for all our clients for free.
- The standard deductionfor 2020 increased to $12,400 for single filers and $24,800 for married couples filing jointly.
- Incometax brackets increased in 2020 to account for inflation.
| 2020 Marginal Income Tax Rates and Brackets | ||||
| 2020 Marginal Tax Rates | Single Tax Bracket | Married Filing Jointly | Head of Household | Married Filing Separately |
| 10% | $0–9,875 | $0–19,750 | $0–14,100 | $0–9,875 |
| 12% | $9,875–40,125 | $19,750–80,250 | $14,100–53,700 | $9,875–40,125 |
| 22% | $40,125–85,525 | $80,250–171,050 | $53,700–85,500 | $40,125–85,525 |
| 24% | $85,525–163,300 | $171,050–326,600 | $85,500–163,300 | $85,525–163,300 |
| 32% | $163,300–207,350 | $326,600–414,700 | $163,300–207,350 | $163,300–207,350 |
| 35% | $207,350–518,400 | $414,700–622,050 | $207,350–518,400 | $207,350–311,025 |
| 37% | Over $518,400 | Over $622,050 | Over $518,400 | Over $311,025 |
Form 1040 2019
The IRS has announced that they are currently open and processing mail, 2019 tax returns, payments, refunds, and correspondence. During 2020 the IRS experienced delays in processing paper tax returns due to limited staffing. However, COVID19 continues to cause delays in some of their services. We estimate that at this point the IRS has processed around 50% of the 2019 tax returns received on paper.
New things taxpayers should keep in mind for Form 1040 2020.
This year, there are some key items to consider involving credits, deductions, and refunds:
Recovery Rebate Credit/Economic Impact Payment.
Taxpayers may be able to claim, within the Form 1040 2020, the Recovery Rebate Credit if they met the eligibility requirements, for both the first and the second Stimulus Check.
Interest on refunds taxable.
Taxpayers who received a federal tax refund in 2020 may have been paid interest. Refund interest payments are taxable and must be reported on federal income tax returns. In January 2021, the IRS will send Form 1099-INT to anyone who received interest totaling $10 or more.
Child Tax Credit
Got kids? Families can claim up to $2,000 per qualified child with this tax credit and since this is a refundable credit, your family can receive up to $1,400 per child as a refund.
Strong recommendation for 2021
Contact you tax preparer to check what other forms you must attach to your 2020 US Tax Return, especially those connected with the automatic exchange of information between both Tax Agencies in the USA and Spain.
The Form 8938 report of the financial accounts abroad, Form 5471, Information Return of U.S. Persons with Respect to Certain Foreign Corporations or Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company (PFICs) Penalties for not filing these forms are $10,000 per year not filed.
What we need to prepare your 2020 US Tax Return and FBAR
For us to prepare your Tax Return this year you should upload as soon as possible all important tax records: These include, W-2s from employers,1099s from banks and other payers, other income documents and virtual currency transaction records, even if we need to file first your Spanish Tax return from April to July, 2021.
If you need any further information, please do not hesitate to contact us or book a free consultation appointment.
Antonio Rodriguez – US Tax Consultants
I received interest on federal tax refund. I am filing 1040NR as a nonresident. I did not receive 1099 but it could be lost in the mail (anything can happen in international mail). Is the interest considered “effectively connected” income or “not effectively connected” income? Or is it taxable at all for nonresidents? I appreciate your help. Thank you.
The Internal Revenue Code at Section 871(i)(2) and (3) states thatinterests paid to a Non Residen Alien is exempt of U.S. Tax, that might be the reason for the IRS not sending you the 1099.
Antonio