If you’re living or working outside the United States, understanding your expat tax reporting obligations is essential to avoid costly penalties and keep your peace of mind. Whether you’ve just moved abroad or have been overseas for years, the IRS still expects you to file a U.S. tax return on your worldwide income. But don’t worry, you can take advantage of rule exceptions like the foreign earned income exclusion and foreign tax credits if you file correctly.

Understand your expat tax obligations

Even though you’re abroad, the IRS generally treats you like any other taxpayer. That means you must file Form 1040 each year to report your global earnings. You might also have to submit additional documents depending on the type of income you receive or how much you keep in foreign institutions. If you need a quick overview of the key steps, check out our expat tax compliance checklist.

Why the United States taxes worldwide income

U.S. tax law is based on citizenship rather than residency. As a citizen or Green Card holder, you remain responsible for reporting and paying taxes on income earned anywhere in the world. This requirement can be confusing, but it also opens the door to various deductions and exclusions your overseas peers in other countries may not have.

Who must file

  • U.S. citizens working abroad
  • Green Card holders living outside the United States
  • Anyone classified as a resident alien for tax purposes

You can learn more about these rules in IRS Publication 54.

Gather essential IRS forms

Your expat situation might involve several extra forms. By staying on top of the paperwork, you’ll reduce your risk of penalties and ensure you don’t miss out on valuable tax benefits.

The key documents

  • Form 2555 (Foreign Earned Income): Used to claim the foreign earned income exclusion. For guidance on filling this out, head to our IRS form 2555 instructions.
  • Form 1116 (Foreign Tax Credit): Lets you claim credits for taxes paid to a foreign country.
  • FinCEN Report 114 (FBAR): Report foreign financial accounts exceeding $10,000 at any point in the year. See our FBAR filing requirements us expats for more details.

Additional forms

  • Form 8938 (FATCA): Required if your specified foreign financial assets exceed certain thresholds.
  • Forms 5471, 8865, or 8854: Needed if you have ownership in foreign corporations, partnerships, or you renounce U.S. citizenship.
  • Form 8833: Filed if you’re claiming a tax treaty position.

For a broader overview of what the IRS expects, check out our US expat tax compliance requirements.

Manage crucial filing deadlines

You automatically get a two-month extension to file your U.S. tax return when you live abroad. However, interest on any tax due still accrues from April 15.

Mark your calendar

  • April 15: Standard filing deadline in the U.S.
  • June 15: Automatic two-month extension for expats.
  • October 15: Additional extension if you file Form 4868 (due by June 15).

If you want a quick reference on important due dates, you can also bookmark our expat tax reporting deadlines.

Avoid common compliance mistakes

Mistakes happen, but expat tax errors can be much costlier than domestic filing missteps. Staying aware of some common oversights can save you headaches later.

Overlooking bank accounts

If your foreign financial accounts total more than $10,000 at any point during the year, you must file the FBAR electronically. Neglecting this simple requirement may lead to hefty fines.

Missing the foreign earned income exclusion

If you fail to claim the exclusion by filing Form 2555 correctly, you risk owing far more than necessary. Read up on foreign earned income exclusion rules to see if you qualify.

Forgetting FATCA thresholds

FATCA (Form 8938) thresholds vary depending on your filing status and whether you live overseas or in the U.S. Failing to file Form 8938 when required can trigger automatic penalties.

Request a compliance review

It’s easy to feel overwhelmed by all the IRS forms and deadlines, especially when you’re juggling a life abroad. At American Pacific Tax, we help you simplify these steps and reduce your IRS risk. Our experts can walk you through US expat tax filing guidelines, provide clarity on IRS reporting requirements for expats, and help you avoid the most common pitfalls.

Ready to take the stress out of your expat tax reporting obligations? Reach out today to request a compliance review or consultation. We’re here to guide you, so you can focus on enjoying life abroad while staying on solid ground with the IRS.