As a US expat living abroad – filing your taxes was probably not something on your mind frequently. Although, in spite of you living your best life in the country of your dreams (hopefully!); taxes still remain a part of your responsibilities as a US citizen. However, no stress because here lies an overview of some of the essentials you should know as a US expat.

Do Expats File from Abroad?

You would think that if a majority of countries would only have people filing taxes in the country they’re residing in. Although, that’s not the case for the US. The US is one of two countries that has taxes linked to their citizenship. Therefore, it does not matter where in the world you’re living, your US tax obligation is your shadow. However, although you still need to file US taxes if you’re an expat, you most likely will not owe taxes – keep reading to know more!

When does an Expat need to File?

When it comes to filing your US tax return as an expat, you have not only the April 15^th deadline to worry about. In fact, you have three other deadlines to be aware of as a US expat.

April 15th: This is the standard filing date for any US taxpaper living in the US, but it’s also the deadline to pay any taxes that are owed to the IRS – even if you’re an expat.

June 15th: As an expat you get an automatic 2-month extension from the April deadline. Some documents from your foreign employers can come a bit late so this deadline gives you a little extra time.

October 15th: If you need more time past June then you can always file an extension, but that needs to be done by June 15th.

December 15th: This is the last possible date to file, but you need to make sure you file request this special extension in October.

Remember that while the month is always fixed, if the 15th falls on a weekend or holiday, the due date that year will be the following workday.

How do Expats File an Extension?

Navigating tax extensions is an important aspect of managing your tax filings as a US expat. If the June 15th deadline is approaching and you’re not ready to file, you can request an extension by submitting Form 4868.

Form 4868 is an ‘Application for Automatic Extension of Time to File US Individual Income Tax Return’. This grants you until October 15th to file your tax return without incurring late-filing penalties.

For expats who find themselves in complex tax situations or who simply need more time to gather necessary documentation, there’s even the possibility of a further extension until December 15th. This additional extension isn’t automatic; you must write to the IRS explaining the reasons you need more time.

Keep in mind that while extensions give you more time to file, they do not extend the time for payment. Any taxes owed are still due by the original April 15th deadline to avoid interest and late payment penalties.

Does an Expat File an FBAR?

In most cases, expats must file a Report of Foreign Bank and Financials Accounts (FBAR), but only if the combined maximum balance of all your foreign financial accounts exceed $10,000. This includes bank accounts, brokerage accounts, mutual funds, trusts, or any other types of financial accounts. It doesn’t matter if it was only for a second that your foreign account went over $10,000, you’ll still need to file.

Filing an FBAR is separate from your tax return and is done through the Financial Crimes Enforcement Network’s (FinCEN) Form 114, which must be filed electronically. The deadline for the FBAR is April 15th, with an automatic extension to October 15th, aligning with the tax return filing dates. It’s critical to accurately report all foreign financial assets to avoid substantial penalties. Understanding and complying with FBAR requirements is an essential part of managing your tax responsibilities as a US expat.

Does an Expat File a Tax Return and Get a Refund?

When you file your tax return, there’s no guarantee that you’ll get a refund. However, if you meet the criteria for say the Child Tax Credit or the Stimulus Checks, you should be able to receive a refund.

Fortunately, there are tax benefits such as the Foreign Earned Income Exclusion, Foreign Tax Credit, and US tax treaties to avoid double taxation so while you may not get a refund, you should not owe taxes.

What Tax Benefits can Expats File?

There are tax benefits for individuals living abroad – one’s that work to prevent double taxation. If you haven’t heard of them yet, here’s the most common benefits for expats:

Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) is a powerful tool for US expats to reduce their taxable income. If you meet certain requirements, such as residing outside the US for most of the year, you may be able to exclude up to a set amount of your foreign earnings from US taxes.

To maximize this benefit, it’s important to understand the eligibility criteria, which includes passing either the Bona Fide Residence Test or the Physical Presence Test. Remember, this can only exclude earned income—things like wages and self-employment income—and not passive income such as dividends and interest.

Foreign Tax Credit

The Foreign Tax Credit (FTC) is another crucial element for US expats to lessen the risk of facing taxation twice on the same income. This credit allows you to offset the taxes you pay in your host country against your US tax liability. If you’ve paid or accrued tax to a foreign government, and that income is also subject to US taxation, you can claim the FTC to reduce your US tax bill dollar for dollar.

To take advantage of the FTC, you must file Form 1116 with your US tax return. The form helps calculate the credit based on foreign income and taxes paid on it. There are limitations to the credit, including the fact that it cannot exceed the amount of US taxes on that foreign income. It’s essential to have a thorough understanding of how the FTC works or to reach out to the MyExpatTaxes tax professionals who can guide you through the process to ensure you’re not leaving money on the table.

Tax Treaties

Tax treaties play a pivotal role in preventing double taxation for US expats. These agreements are made between the US and many other countries to define tax rules on income, including which country has the right to tax certain types of income. By understanding the provisions of the applicable tax treaty, you can determine how to report your income correctly and take advantage of treaty benefits.

To apply a tax treaty, you must be a resident of one of the treaty countries and meet other requirements outlined in the specific agreement. Some treaties provide for reduced tax rates or exemptions on certain types of income.

It’s important to carefully read the treaty that applies to you and understand its impact on your tax situation. In some cases, the treaty will be more beneficial than the standard foreign tax credit or foreign earned income exclusion, so choosing the right option can significantly affect your tax outcomes.

Expat, file with software for affordable tax returns

The time is nearing for you, fellow expat, to file your taxes! Curious about where to file? Let MyExpatTaxes spill the tea – we have a whole load of information you should consider before filing.

Maybe you’re just doing a bit of research, preparing for your filing abroad. Whether you have lived abroad for years or this is your first year it’s good to know your options.

DIY Software

So to start, MyExpatTaxes offers a standard package for users to “do-it-yourself”, where you can file all your essentials as a US expat. These includes forms 1116 (FTC), 2555 (FEIE), 8938 (FBAR & FATCA) along with the standard 1040 (duh!) and more. It’s a great option for anyone with who’s a single filer or married filing jointly with minimal assets.

However, if you are an expat bold enough to run your own business in a foreign country (well-done, MyExpatTaxes tips their hat at your success), there is another package that would be recommended! It’s a bit more expensive, but it is well worth it!

The premium package allows for you to file your corporate forms such as form 5471 or form 8865 with an additional help from our tax professionals. There is plenty of extra support to help you to file that hefty load of self-employed forms.

NOTE: In 2024, the premium package has an optional 30 minute consultation with one of our tax professionals. However, due to an increased demand, consultation calls are subject to availability.

Nevertheless, there is no pressure, take your time and think about what company and package is best suited to your needs as a US expat filing abroad.

The Streamlined Procedure

You may have heard about the streamlined procedure alright, but for those who haven’t this one is for you! It’s not uncommon for US citizens who have moved abroad to be unaware of their tax duties for many years. Luckily for you, the IRS noticed a familiar trend among expats, so they created the Streamlined Procedure to help you catch up. Yes, you can file using the Streamlined Procedure to file up to three years of prior tax returns and six years of FBAR’s WITHOUT PENALTY!

Yeah, we said it, without penalties! But you must keep in mind that this needs to be done before the IRS sends you a letter telling you to file! Want to know more about the Streamlined Procedure, check out the downloadable PDF guide dedicated to explaining all you need to know.