A tale of two expat tax returns: Two clients, both self employed with about $45K income. One owed over $4,000 in taxes, the other received a refund of almost $29,000. How is this possible?
All depends on the person's situation. The one who owed taxes lives in Israel. Has one child. Had received advance (enhanced) child tax credit payments which had to be repaid, due to not having had US residency in 2021.
Though there was a credit of $1400 for the recovery rebate for the child, a lot of tax was still left. The standard child tax credit covered $1400 already received for advance payments, but still left another $400 to be repaid.
Self employment tax was the big killer here. Total tax over $4000
The other client lives in a country which has a totalization agreement with the US. Meaning, if they had contributed to the foreign country's social security system, they don't have to pay the US self employment taxes. Four children = child tax credit $5600. Recovery rebate for 5 people = $7000. FFCRA credit (Corona Sick and Family leave for self employed individuals): $16,370. Client qualified for the max credit, due to having had COVID the requisite amount, and school closures in the country had been very long. Total refund: $28,970
Goes to show that a person's situation has a big affect on their refund amount. The tax prep firms/sites who advertise "Our clients receive an average refund of $XXXXX" are a compete farce - everything depends on the personal situation of the taxpayer (as well as skills of the tax preparer, granted :) ).
Comments