How to File Your US Taxes From Abroad

Navigating United States tax obligations while residing abroad presents a unique challenge for citizens and green card holders. Unlike most countries that base tax residency on physical presence, the U.S. maintains a citizenship-based taxation system. This means American citizens and green card holders generally remain subject to U.S. income tax on their worldwide income, regardless of where they live or earn their money. Understanding these requirements ensures compliance. This article guides individuals through fulfilling U.S. tax responsibilities from abroad.

Determining Your Filing Obligation

United States tax law generally requires all citizens and green card holders to file a federal income tax return, even if they live and work in a foreign country. A filing requirement exists if an individual’s gross income exceeds certain annual thresholds, which are adjusted for inflation.

For the 2024 tax year, a single individual under age 65 must file a return if their gross income is at least $14,600. For those married filing jointly with both spouses under 65, the threshold is $29,200. Even if no U.S. tax is ultimately owed due to various exclusions or credits, the obligation to file a return remains. For most U.S. citizens and permanent residents living abroad, the filing requirement is primarily determined by their worldwide gross income exceeding these basic thresholds.

Key Expat Tax Provisions and Required Forms

U.S. taxpayers living abroad can often reduce or eliminate their U.S. tax liability by utilizing specific provisions designed to prevent double taxation. These provisions require attention to eligibility criteria and the accurate completion of various IRS forms.

The Foreign Earned Income Exclusion (FEIE), claimed on Form 2555, allows eligible individuals to exclude foreign earned income from U.S. taxation. To qualify, a taxpayer must meet either the bona fide residence test, demonstrating residence in a foreign country for an uninterrupted period including an entire tax year, or the physical presence test, being physically present in a foreign country for at least 330 full days during any 12-month period. For the 2024 tax year, the maximum exclusion amount is $126,500, with this limit increasing to $130,000 for 2025. If both spouses qualify and file jointly, they can each claim the FEIE, potentially excluding up to $253,000 for 2024.

The Foreign Tax Credit (FTC), claimed on Form 1116, helps avoid double taxation. This credit allows taxpayers to subtract foreign income taxes paid to a foreign government from their U.S. tax liability. The FTC applies to income, war profits, and excess profits taxes paid or accrued to a foreign country or U.S. possession. While the FEIE applies only to earned income, the FTC can be used for various types of foreign-source income, including passive income like dividends or interest.

The Foreign Housing Exclusion or Deduction, available on Form 2555, complements the FEIE by allowing eligible individuals to exclude or deduct certain foreign housing expenses. This covers reasonable housing expenses like rent and utilities that exceed a base housing amount. For 2024, the base housing amount is 16% of the FEIE, or approximately $55.45 per day, with a maximum housing exclusion limit of $37,950. This exclusion is available to employees, while self-employed individuals may claim a deduction for these expenses.

Individuals abroad must also report foreign financial accounts. The Report of Foreign Bank and Financial Accounts (FBAR), FinCEN Form 114, must be filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS, if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. This includes bank accounts, brokerage accounts, and certain other financial accounts over which a U.S. person has financial interest or signature authority.

The Foreign Account Tax Compliance Act (FATCA) requires certain U.S. taxpayers to report specified foreign financial assets on Form 8938, which is filed with the tax return. For individuals living abroad, the filing threshold for Form 8938 is higher than for those in the U.S. A single taxpayer abroad must file if the total value of specified foreign financial assets exceeds $200,000 on the last day of the tax year or $300,000 at any time during the year. For married individuals filing jointly who live abroad, these thresholds are $400,000 on the last day of the tax year or $600,000 at any time during the year. Specified foreign financial assets include financial accounts and certain foreign-held investments. While both FBAR and Form 8938 report foreign assets, they have different reporting thresholds, cover different types of assets, and are filed with different government agencies.

Other common forms that expats might need to file include Schedule B if they have foreign bank accounts or receive interest and dividends from foreign sources. Those operating a business abroad would file Schedule C, and potentially Schedule SE, if their net earnings from self-employment are $400 or more. Capital gains and losses from the sale of foreign assets are reported on Schedule D.

Understanding Filing Deadlines and Extensions

The standard deadline for filing U.S. federal income tax returns is April 15 following the close of the tax year. However, U.S. citizens and resident aliens living abroad receive an automatic two-month extension, shifting their filing deadline to June 15. This extension applies without requiring any specific action from the taxpayer.

Even with this automatic extension, taxpayers may need additional time to prepare their returns. An additional extension to October 15 can be requested by filing Form 4868 by the June 15 deadline. An extension to file is not an extension to pay any taxes owed. Interest and potential penalties may still apply to any unpaid tax liability after the original April 15 deadline, even if an extension to file has been granted.

Taxpayers who anticipate owing U.S. taxes on income not subject to withholding, such as self-employment income or investment income, may need to make estimated tax payments throughout the year. These payments are made quarterly using Form 1040-ES. Estimated tax payments are required if a taxpayer expects to owe at least $1,000 in tax for the year and their withholding and credits are less than 90% of the tax shown on the current year’s return or 100% of the tax shown on the prior year’s return. Paying estimated taxes helps avoid underpayment penalties.

Methods for Submitting Your Tax Return

Once a U.S. tax return and all necessary accompanying forms are completed, taxpayers abroad have several options for submission.

Electronic filing, or e-filing, is a convenient method. Many commercial tax preparation software programs support the forms commonly used by expats. Taxpayers can prepare their returns using these software solutions and then transmit them electronically after reviewing and electronically signing. Alternatively, tax professionals specializing in expat taxes can prepare and e-file returns on behalf of their clients.

For those who prefer or need to mail a paper return, specific IRS addresses are designated for taxpayers living abroad. If no payment is enclosed with the return, the mailing address is: Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215 USA. Using a traceable mail service is advisable for delivery confirmation.

Any U.S. tax liability owed can be paid through various methods. The IRS offers online payment options such as IRS Direct Pay, which allows direct transfers from a bank account. The Electronic Federal Tax Payment System (EFTPS) is another method for making federal tax payments. Taxpayers can also mail a check or money order along with their tax return, or separately if they are e-filing.

Addressing Past Non-Compliance

For U.S. taxpayers abroad who have not met their past filing obligations, the IRS offers specific programs to help them become compliant. These programs are designed to address different scenarios of non-compliance, particularly when the failure to file was not willful.

The Streamlined Foreign Offshore Procedures (SFOP) are for eligible individuals. To qualify, taxpayers must certify that their failure to comply was due to non-willful conduct, meaning it resulted from negligence, inadvertence, or a good faith misunderstanding of the law. Under SFOP, taxpayers are generally required to file delinquent or amended tax returns for the most recent three years for which the tax return due date has passed. They also must file any delinquent FBARs (FinCEN Form 114) for the most recent six years. A benefit of SFOP is the waiver of certain penalties, including offshore penalties, if the non-compliance is determined to be non-willful. Individuals must also meet a non-residency requirement, demonstrating they have been physically outside the United States for at least 330 full days in one or more of the most recent three years. The process involves submitting the required tax returns, FBARs, and a signed certification of non-willfulness on Form 14653.

For those whose non-compliance is limited to FBARs, the Delinquent FBAR Submission Procedures apply if a taxpayer has properly reported all their income but failed to file FBARs. They can file the delinquent FBARs online through the BSA E-Filing System and attach a statement explaining why the FBARs were filed late.

The Delinquent International Information Return Submission Procedures are for taxpayers who have filed all required income tax returns and FBARs but omitted other international information returns, such as Form 8938. This procedure allows for the submission of these delinquent information returns with a reasonable cause statement.

For cases involving willful non-compliance, where a taxpayer knowingly failed to meet their obligations, the IRS offers the Voluntary Disclosure Program. This program is more stringent and involves potential penalties, but it provides a pathway to resolve tax issues and avoid criminal prosecution. It is recommended for taxpayers with willful conduct to consult with a tax professional specializing in international tax law to navigate this complex process effectively.