Simple Tax Guide for Americans in Switzerland
At TFX we’ve been preparing U.S. taxes for Americans living in Switzerland for over 20 years. Our clients hail from all parts of this small yet diverse country but roughly half come from Zurich, Geneva and Bern.
US citizens, as well as permanent residents, are required to file expatriate tax returns with the federal government every year regardless of where they reside. Along with the typical tax return for income, many people are also required to submit a return disclosing assets which are held in bank accounts in foreign countries by using FinCEN Form 114 (FBAR).
Please note - if you have undeclared Swiss bank account(s), we can help you resolve this issue with the IRS. Do not wait for your bank to contact you first or even freeze your account. Find out more about our special service for Swiss Clients:
The United States is among only a few governments who tax international income earned by their citizens, as well as permanent residents, residing overseas. There are, however, some provisions that help protect from possible double taxation. These include:
- The Foreign Earned Income Exclusion. This exclusion allows one to exclude USD 101,300 (this amount is for 2016 taxes) in earned income from foreign sources.
- A tax credit allowing tax on remaining income to be reduced based on the taxes paid to foreign governments.
- An exclusion on foreign housing that allows additional exclusions from their income for some amounts paid to cover household expenses due to living abroad.
Preparing a quality tax return following proper tax planning should allow one to use these, as well as other strategies, in minimizing or possibly eliminating tax liability. Note that in most cases the filing of a tax return is required, even if taxes are not owed.
Am I Required to File My Taxes if I’m Residing in Switzerland?
Absolutely! Even if you are not living in the United States or in a US territory, and even if you don’t have any income from the US, you must still file a tax return, as well as pay taxes, calculated on all your income worldwide. The tax laws are quite confusing, and frequently change. It seems nearly impossible to file a return accurately. Along with filing income taxes, you might have compliance obligations for the Foreign Bank and Financial Account Reporting (FBAR) regulations as well. Penalties for incorrect reporting can be substantial.
What Happens if I Have Not Filed My Taxes?
The IRS offers some relief to delinquent taxpayers via a special procedure for filing. This may be a benefit to you if your returns have not been filed in previous years. Contact an expert tax advisor, who can help you get back on schedule with IRS filings.
If I Pay Swiss Taxes, Do I Need to Pay US Taxes?
There are ways for United States expatriates to avoid much double taxation. There is a treaty between Switzerland and the United States that outlines some of these benefits. A tax professional will help you understand the treaty and the available benefits.
We'd like to shed light on many questions that we are frequently asked by our clients from the Switzerland. Below we will explain tax concepts that are important to you as a Swiss resident and also explain how to report the details of your Swiss life on our Tax Questionnaire.