Filing taxes for the United States from abroad seems an ennobling task, yet the task can be simplified and made safe from mistakes with right means. As an American expat, you are expected to file for taxes every year regardless of where you stay, and the rules are complicated when compared to those applicable for stateside filers. This consummate guide gathers expert hints from seasoned expats and tax professionals telling you how to file for taxes online so that deductions can be maximally attained.
Usually, the last thing any expatriate wants to do when he or she relocates abroad is to start thinking about filing tax returns. First, one needs clarity with respect to the major tax obligations of expatriates that specifically pertain to Americans living abroad:
Understanding the Unique Tax Obligations of US Expats
Reading the filing process, one needs to understand the unique tax obligations that Americans living abroad are subject to:
1. Worldwide Income Reporting
Only a few countries in the world tax on citizenship instead of residency, the United States being one of them. This means that all income has to be declared on the tax return, whether earned within the United States or outside:
- Salary and wages
- Self-employment income
- Rental income
- Investment income (dividends, interest, capital gains)
2. Foreign Earned Income Exclusion (FEIE)
The FEIE allows qualifying expats to exclude up to $120,000 (2023 amount, adjusted annually) of foreign-earned income from U.S. taxation. To qualify, you must meet either:
- The Physical Presence Test (330 days outside the U.S. in a 12-month period)
- The Bona Fide Residence Test (legal resident of a foreign country for an entire tax year)
3. Foreign Tax Credit (FTC)
The FTC allows you to offset the U.S. tax dollar-for-dollar if you pay income taxes to a foreign government. This comes in handy, for instance, if you happen to be living in a country with high income taxes, where your FEIE doesn’t quite cover the liabilities you’re liable to pay.
It reduces your U.S. tax bill dollar-for-dollar if you pay income taxes to some foreign government, and this becomes especially useful if you happen to live in a high-tax country and your tax liability is not fully covered by the FEIE.
4. FBAR (Foreign Bank Account Reporting)
If you have $10,000 or more in foreign financial accounts at any point during the year, you must file FinCEN Form 114 (FBAR). Penalties for non-compliance can be severe, with fines of up to $10,000 per violation for non-willful neglect and even criminal charges for willful non-compliance.
5. FATCA Reporting (Form 8938)
Under the Foreign Account Tax Compliance Act, or FATCA, any expatriate who has foreign accounts holding more than a net worth of about $200,000 is required to attach Form 8938 with the tax return tax return.
Step-by-Step Guide to Filing Taxes Online as an Expat
1. Choose the Right Tax Preparation Service
Since most U.S. tax software (TurboTax, H&R Block) isn’t designed for expats, you need a specialized expat tax service like Expat Tax Online. Benefits include:
- Expertise in expat-specific forms (FEIE, FTC, FBAR, FATCA)
- Minimized risk of errors that could trigger IRS audits
- Professional advice on tax-saving strategies
2. Gather All Necessary Documents
Before starting, compile:
- Income documents (W-2, 1099, foreign pay stubs)
- Foreign tax payment records (for FTC claims)
- Bank and investment statements (for FBAR/FATCA)
- Housing expense receipts (for FEIE housing exclusion)
- Previous year’s tax return (for reference)
3. Determine Your Optimal Tax Strategy
Should you take the FEIE or FTC? The best choice depends on:
- Your income level
- The tax rates in your host country
- Whether you have self-employment income (FEIE doesn’t cover self-employment tax)
A professional tax preparer can run calculations to maximize your savings.
4. File Before Deadlines (Or Request Extensions)
- April 15: Deadline to pay any taxes owed (to avoid interest)
- June 15: Automatic extension for expats to file (but not to pay)
- October 15: Additional extension available if needed
Pro Tip: If you owe taxes, pay by April 15 even if filing later to avoid penalties.
5. Don’t Forget State Taxes
Some states (California, Virginia, New Mexico) still tax expats unless you formally sever residency. Check your state’s rules to avoid surprises.
Common Mistakes Expats Make (And How to Avoid Them)
1. Missing FBAR/FATCA Deadlines
- FBAR is due April 15 (aligned with tax day) but has an automatic extension to October 15.
- FATCA (Form 8938) is filed with your tax return.
Solution: Set calendar reminders or let a tax service handle it.
2. Incorrectly Claiming the FEIE
- You can’t exclude income earned while physically in the U.S.
- Self-employment tax still applies even if using FEIE.
Solution: Work with an expat tax pro to ensure proper application.
3. Overlooking Foreign Retirement Accounts
- Some foreign pensions (e.g., UK SIPPs, Canadian RRSPs) have special U.S. tax treatments.
- Others may be taxable if not properly reported.
Solution: Research tax treaties or consult a specialist.
4. Assuming Tax Software Will Handle Everything
Most DIY tax software doesn’t properly support:
- FEIE/FTC optimization
- FBAR filings
- Complex expat situations (foreign rentals, self-employment)
Solution: Use an expat-specific tax service for full compliance.
Why Expats Love Online Tax Preparation Services
1. Saves Time & Stress
Instead of researching ever-changing tax laws, you upload documents and let experts handle the rest.
2. Reduces Audit Risk
Professionals ensure accurate filings, minimizing IRS scrutiny.
3. Maximizes Refunds & Savings
Experts know all deductions and credits expats qualify for.
4. Provides Ongoing Support
If the IRS has questions, your tax service can assist.
Final Thoughts
Filing U.S. taxes from abroad doesn’t have to be a nightmare. By:
✅ Using a tax service specialized with US Expats
✅ Organizing documents early
✅ Understanding key deadlines
✅ Avoiding common mistakes
…you can file confidently and save money.
Need help? Consider a free consultation with a service like Expat Tax Online to streamline your filing.
