US TAX COMPLIANCE WHEN IN ITALY
Worldwide Income. The United States of America taxes its CITIZENS and resident
aliens (green card holders) on their worldwide income regardless of their location or
source of income. The rules for ling income, estate, and gift tax returns and
paying estimated tax are generally the same whether you are in the United States
Italy taxes its RESIDENTS on their worldwide income regardless of the source of income. If you are a permanent resident of Italy, you are subject to two tax jurisdiction: USA and Italy.
Who Must File? You generally need to file an individual income tax return (Form
1040) with the Internal Revenue Service (IRS) if your gross income is over:
- Single: $12,000
- Married filing jointly: Qualifying widow(er) $24,000
- Married filing separately: $12,000
- Head of household: $18,000
- Self-employed: $400
The amounts are higher if you or your spouse are blind or over age 60.
- You sold your home during the tax year;
- US taxes were withheld at source for any reason.
Double taxation is generally avoided thanks to the Foreign Earned Income Exclusion
and/or Foreign Tax Credit, and various other US-Italy Tax Treaty Provisions.
When to File. You have an automatic extension until June 15 to file and pay any
amount due. You can ask for an additional extension until October 15. Interest is due
on any amount unpaid calculated from April 15.
FBAR/FATCA. You need to file a 'Foreign Bank Account Report' (FBAR) with the
Financial Crimes Reporting Network (FinCEN) if the aggregate value of your foreign
(non-US) financial accounts (bank accounts, brokerage accounts, mutual funds,
trusts, etc.) exceeded $10,000 at any time during the tax year. The filing deadline is April 15.
Additional IRS Reporting. You are subject to additional IRS reporting:
- If you own 10% or more in a foreign corporation or Llc (Srl);
- If you are the beneficiary of a foreign trust;
- If you have a passive participation in a foreign corporation or mutual fund.
Self-Employment Tax. If you are NOT a dual-national, you are required to pay US
self-employment tax (aka social security). If you are a dual national, you can
choose between INPS and Social Security (Totalization Agreement)
Pensions. Pensions (except government pensions) are taxed only by Italy (Article 18
of the tax treaty).
Rental Income. Income from immovable property is taxed only by the jurisdiction
where the properties are located (Article 6 of the tax treaty).
Filing Past Due Tax Returns. If you did not know you had to file, and your
omission was not willful, you may be eligible for the Streamlined Foreign Offshore
Procedures. These procedures require you to file the last 3 missing individual income tax returns (Form 1040) and six years of FBARs.