U.S. Tax Filing Abroad: A Simple Guide

You're a U.S. citizen or green card holder abroad, and yet you must file a U.S. tax return. Yes, that means living overseas doesn't get you out of paying your dues to the IRS. But there are ways to lower or even eliminate what you pay, and making it happen needn't be a nightmare.

Here's the lowdown.

Why You Still Need to File

The U.S. is one of only a handful of nations that taxes citizens, not residents. So if you're a U.S. citizen, the IRS would like to hear from you—wherever you are in the world or make your income.

Even if you:

• Reside overseas on a full-time basis
• Pay taxes abroad
• Owed nothing in the end

…you still need to file a federal tax return every year.

Key Things Expats Need to File or Be Aware Of

1. Form 1040 (U.S. Individual Income Tax Return)

The standard form. All Americans are required to file it each year if they have reached the income level.

2. Foreign Earned Income Exclusion (FEIE) – Form 2555

It can exclude up to $120,000+ (adjusted annually) of foreign earnings if you qualify for some tests:

• Physical Presence Test (330 days outside the U.S. in 12 months)
• Bona Fide Residence Test (long-term residence in a foreign country)

3. Foreign Tax Credit (Form 1116)

If you pay foreign taxes, you can utilize it to offset your U.S. tax. Use this if you're from a country with higher taxes than the U.S.

4. FBAR (FinCEN Form 114)

Have more than $10,000 aggregate in foreign financial accounts? You are required to file an FBAR electronically with FinCEN, apart from your tax return.

5. FATCA (Form 8938)

If your foreign assets exceed some specific thresholds (for example, $200,000 if filing single overseas), you might be required to report them under FATCA.

Deadlines

• Regular Tax Filing: April 15
• Automatic Extension for Expats: June 15
• Optional Extension to October 15: File Form 4868 to obtain this
• FBAR Deadline: April 15 (with automatic extension to October 15)

How to File from Overseas

You can:

• DIY with tax software (not always expat-friendly)
• Hire a U.S. tax professional (costly)
• Use an expat-focused service like Expat Tax Online

Common Mistakes Expats Make

• Thinking they don’t need to file
• Missing the FBAR requirement
• Choosing the wrong tax benefit (FEIE vs. FTC)
• Ignoring state tax obligations (yes, some states cling hard)
• Failure to report foreign pensions or retirement accounts

FAQs

Must I file U.S. taxes if I don't owe anything?

Yes. Filing is required on the basis of income, not tax liability. You may owe nothing due to FEIE or Foreign Tax Credit, but you're still required to file.

What if I haven't filed for years?

You might be eligible for the IRS Streamlined Foreign Offshore Procedures, which allows you to get back on track penalty-free. Expat Tax Online can walk you through it.

Do I have to file a state tax return?

It depends. Some states (such as California or New Mexico) are aggressive and might still treat you as a resident. Cut ties firmly if you want to escape.

Can I file jointly with my non-American spouse?

Yes, but it depends. You might prefer to file separately in order to not drag your spouse into the U.S. tax system. Expat Tax Online can assist you in considering both possibilities.

What if I have a foreign business or investments?

You might need to file extra forms such as Form 5471 (foreign corporations) or report foreign mutual funds (which are a PFIC nightmare). Don't overlook them.