Tax Preparation for Foreign Income and Expats in Los Angeles

Situations We Handle

A foreign bank, brokerage or pension account. A U.S. person with a financial interest in, or signature authority over, foreign financial accounts files FinCEN Form 114, the FBAR, when the aggregate value of the accounts exceeded $10,000 at any time in the calendar year; the report is due April 15, is automatically extended to October 15 with no request, and is filed through FinCEN's BSA E-Filing System, not with the federal return. Form 8938 is filed with the return when specified foreign financial assets exceed, for a person living in the United States, $50,000 on the last day of the year or $75,000 at any time ($100,000 and $150,000 for married couples filing jointly), and, for a person living outside the United States, $200,000 or $300,000 ($400,000 and $600,000 for joint filers); it does not replace the FBAR, and the penalty for not filing it is up to $10,000, plus $10,000 for each 30 days after an IRS notice, to a maximum of $60,000. We take the year-end and highest balances from each account's statements, convert them at the IRS yearly average exchange rate, and report the interest, dividends and gains on the return. See Individual Tax Preparation.

Wages earned abroad. A person whose tax home is in a foreign country and who either is a bona fide resident of that country for an uninterrupted period that includes a full tax year or is physically present there for at least 330 full days in any 12 consecutive months may exclude foreign earned income on Form 2555. The exclusion is $132,900 per person for 2026, up from $130,000 for 2025, and the housing expense limitation is $39,870 for 2026. California does not allow the exclusion: the excluded amount is added back on Schedule CA (540), Part I, line 8d, and the Form 2555 housing deduction is reversed on Part I, Section C, line 24j. We work out whether the exclusion or the credit below gives the lower federal tax, and the California return is prepared with the add-back either way.

Foreign taxes paid. Foreign income taxes may be taken as a credit on Form 1116 or as an itemized deduction on Schedule A, not both for the same taxes. The credit can be claimed without Form 1116 when all foreign-source gross income is passive and the qualified foreign taxes are $300 or less, $600 on a joint return. California allows no deduction for foreign income taxes, and its Schedule S credit covers net income tax paid to another state or a U.S. possession, not to a foreign country. We prepare Form 1116 by income category from the foreign tax statements and keep the unused credit for carryover.

Living abroad with a California question. U.S. citizens and resident aliens are taxed on worldwide income wherever they live; a taxpayer residing overseas on April 15 has an automatic 2-month extension to June 15 without a request, a further extension to October 15 requires Form 4868 filed before June 15, and interest runs from April 15. A California resident is taxed on all income regardless of source. Under the Franchise Tax Board's safe harbor, a California domiciliary outside the state under an employment-related contract for an uninterrupted period of at least 546 consecutive days is treated as a nonresident, unless intangible income exceeds $200,000 in a taxable year or the principal purpose of the absence is tax avoidance; return visits of 45 days or less in a taxable year are allowed. A part-year resident files Form 540NR and pays California tax on all income received while a resident and on California-source income received while a nonresident. We prepare Form 540 or Form 540NR from the facts of the year; the residency rules are stated here as the Franchise Tax Board states them, and we do not promise a result under them.

A gift or inheritance from abroad. A gift is generally not taxed to the person who receives it, but Form 3520 Part IV is required when gifts or bequests from a nonresident alien or a foreign estate exceed $100,000 in the year, with gifts from related donors added together, and when gifts from foreign corporations or partnerships exceed $20,573 for 2026 ($20,116 for 2025); the form is filed separately from the return and is due on the 15th day of the 4th month after the end of the tax year. Money that stays in a foreign account in the recipient's name counts toward the $10,000 FBAR threshold above.

Years that were missed. For a person the IRS has not contacted about delinquent FBARs and who is not under investigation, the IRS's instruction is to file the late reports as soon as possible; the civil penalty maximums are adjusted annually for inflation. The IRS also maintains Streamlined Filing Compliance Procedures for individuals residing in and outside the United States, under which the taxpayer certifies that the failure was not willful and, in the version for those living abroad, files the most recent three years of returns. We prepare the returns for the missed years from the bank and income statements, with the foreign-account reporting each year requires; what the IRS decides about penalties is its decision. See Tax Planning.