To help you get organised we have talked with an expert from the Expat Tax team at H&R Block, RoseMarie Guaglieri:
Is it true that the majority of Americans abroad have a tax filing requirement? Why would this be the case if they are no longer living in the U.S. and pay taxes to their resident country?
Yes, it’s true that most Americans living abroad still have a tax filing requirement with the U.S. government. This is because the U.S. taxes are based on citizenship, not residency. So, even though they’re paying taxes in their resident country, the U.S. still wants to ensure its citizens are properly reporting their income and receiving the tax advantages available to them.
Tax time isn’t anyone’s favorite time of year, but here’s the exciting part—filing could actually put money back in your pocket! Did you know there’s still a $1,400 stimulus check available for eligible Americans and their children with valid tax ID numbers? But time is running out—if you haven’t filed your 2021 return yet, the deadline to claim this benefit is April 15, 2025. I highly encourage anyone who hasn't filed their 2021 income tax return yet to reach out for a quick chat with one of our expat tax advisers to discuss your options.
But that’s not all! If you have dependent American children with valid tax IDs, you could also qualify for the Child Tax Credit, which can significantly reduce your taxes or even result in a refund! Filing is key to unlocking these benefits.
In addition to the above, the U.S. offers provisions to help prevent double taxation, like the Foreign Earned Income Exclusion (FEIE). If you qualify, you can exclude up to $126,500 of earned income for your 2024 return! Plus, the Foreign Tax Credit helps offset your U.S. tax bill with the taxes you've already paid to your host country, meaning you’re not paying tax on the same income twice.
Additionally, if you have foreign bank accounts with substantial balances, you may need to file forms like the FBAR (Foreign Bank Account Report).
While filing might seem like a chore, it’s a legal requirement—and in some cases, a potential financial benefit! The provisions available can reduce or even eliminate your tax burden, so don’t let the paperwork hold you back!
What guidance would you provide to someone who lives abroad but has not filed a tax return in years?
First, I’d reassure them that they’re not alone—our Expat Tax team has helped thousands of Americans in the same situation. If you’ve honestly overlooked your filing obligations, don’t worry—the IRS has provided a way to catch up voluntarily and penalty-free. If you are in this predicament, you may qualify for the IRS Streamlined Filing Offshore Compliance Procedures . Even if you don’t qualify for this program, you still have options. But don’t wait too long! Programs available now might not be available in the future. The sooner you get ahead of it, the easier it will be - and certainly before the IRS contacts you, as doing so might cost you the privilege of this amnesty program.
But don’t go it alone - this is definitely not a DIY project. There’s a lot to navigate – we can help with the heavy lifting! We’ll help you craft a strong disclosure statement to help you get accepted into the program and guide you every step of the way. Plus, you could qualify for the 2021 stimulus payment mentioned above and up to three years’ worth of Child Tax Credits! We love helping folks with streamlined filings; in fact, this past December, I helped Sarah, a young single mom living in Dubai with American children, obtain over $10,000. She was terrified and unsure, but we did it together. The tax filing burden was lifted, and her bank account got a much-needed boost! Let us help you too !
We understand there is a foreign account reporting requirement for most Americans living abroad, but there appears to be some confusion about when this filing is required and what accounts must be reported. Can you provide some clarification on this?
Absolutely, this is a common area of confusion. The Report of Foreign Bank and Financial Accounts (FBAR) is separate from your tax return filing and having foreign accounts triggers a reporting requirement if the combined value of all your foreign accounts exceeds $10,000 at any point during the calendar year. This $10,000 threshold has remained unchanged for over fifty years, which is why it affects so many Americans due to its relatively low reporting limit.
It’s critical to note that penalties for missing or filing an FBAR late are severe. Under the statute of limitations for FBAR, the IRS has the authority to impose penalties for up to six years of noncompliance. So, it’s really important to stay on top of this.
Here’s where many people trip up: They think that if each account is under $10,000, they’re not required to file. But the key to remember is that it’s the combined total of all accounts that count toward that $10,000 threshold. Even if each individual open account you have is of small value, or even at zero balance, as long as the total exceeds $10,000 at any point during the year, the filing requirement is triggered.
Also, FBAR reporting isn’t just for bank accounts, which is another area of confusion. It includes all foreign financial accounts such as:
- Bank accounts (checking, savings)
- Investment accounts
- Mutual funds or pooled accounts
- Foreign retirement accounts (with some exceptions)
- Certain foreign insurance policies with cash value
Foreign retirement accounts can get tricky, as some may be exempt from FBAR filing under IRS guidelines. To avoid ambiguity, our team takes a conservative approach—we report all retirement accounts to ensure everything is covered.
Another common misconception is thinking you don’t need to report accounts that weren’t intended to generate income. But that's not the case. The FBAR filing requirement is based solely on the balance of your accounts, not whether they earned income. So, if you have multiple foreign accounts, it’s crucial to stay on top of these requirements. If you’re ever unsure, feel free to reach out and ask us.
Many Americans find love abroad, and as you can imagine, they do not think much about taxes in this happy moment of their lives. Are there tax concerns for getting married overseas?
That’s a great question! Many of our clients meet their spouses while studying or working abroad, so we see this quite a bit. It’s such an exciting milestone, but there are definitely some important tax things to keep in mind.
First off, getting married affects your U.S. tax filing status. The IRS usually follows state or foreign laws to determine if your marriage is valid for tax purposes, and in most cases, marriages abroad are recognized. However, you can’t file as "single" if you’re married to a non-resident alien, and you also can’t file jointly unless you make a special election to do so.
The default filing status for a U.S. citizen married to a non-resident alien is Married Filing Separately (MFS). While this status is easier in some ways, it does come with a few downsides—mainly, you lose out on certain deductions and face higher tax rates. If you have dependent U.S. citizens or resident children, you might be able to file as Head of Household (HOH). This status can be beneficial, offering lower tax rates and more deductions, but you can’t claim your spouse as a dependent, and your dependent must have a valid tax ID.
Another option is to elect to treat your nonresident spouse as a U.S. resident, which allows you to file as Married Filing Jointly (MFJ), giving you access to lower tax rates and more deductions. The catch is that it also means your spouse’s worldwide income will be taxed by the U.S., though they might qualify for the Foreign Earned Income Exclusion (FEIE) or foreign tax credits, mitigating any tax impact. Filing jointly can trigger additional reporting requirements, so it's not always the best option for everyone.
The big thing to remember with this election is that it’s binding—once you elect to treat your spouse as a U.S. resident, they’ll always be considered one for tax purposes unless the election is revoked. If you do revoke it, neither of you can make the election again, even with a different spouse. So it’s important to give it some serious thought before deciding. Also, if you go the joint filing route, your spouse will need to get an Individual Taxpayer Identification Number (ITIN) if they don’t already have a Social Security number. This could cause some delays in processing your tax return, so it’s something to plan for.
Lastly, if you receive significant gifts or inherit assets from a nonresident alien spouse, you may need to report these gifts from a nonresident. In the case of two U.S. spouses, gifting of property is unlimited. That is not the case where the other spouse is an NRA. This is something that often gets overlooked, but it’s worth consulting a tax expert about, so you’re not caught off guard.
Are there important deadlines for expats to keep in mind, as well as any other guidance you would provide to avoid complications in the future?
Yes, there are deadlines to be mindful of. But before we dive into filing deadlines, I wanted to share a great opportunity with you. Our Expat Tax team is currently offering a Price Match Promotion for new clients through February 28! Whether you’re a new client or a previous client who didn’t file with us last year, we’ll match the price you paid last year. It’s our first time offering this, and I hope some of your readers take advantage of it.
Now, back to filing deadlines: The standard deadline for U.S. expats is April 15. However, expats automatically receive a two-month extension to June 15 (June 16th in 2025). It’s important to note that this extension is for filing, not for paying your tax due. Interest starts to accrue after April 15, so it's crucial to estimate what you owe and pay that amount to minimize interest and penalties. If you need more time after June 15, you can apply for an additional extension until October 15.
If you already know you won’t be ready by June 15, we’re happy to file an extension for you. Simply register with us, provide some basic details, and ask us to file an extension. We’ll handle the rest (and gently remind you until your taxes are filed)!
Another key deadline to keep in mind is the FBAR (Foreign Bank Account Report), which is due on April 15 but automatically extends to October 15. As mentioned earlier, late FBAR filings can lead to significant penalties, so it’s important to file on time.
One last piece of advice: If you’ve missed filing for a few years, it’s not a matter of if the IRS will catch up with you, but when. Staying off their radar is no longer an option, and it’s best not to try. I also recommend being cautious about tax advice from random people on social media. It’s easy to find misleading or incorrect expat tax advice online, often designed to stir up controversy. Unless you're fully prepared for the potential consequences, it’s best to avoid it. One-size-fits-all advice doesn’t work when it comes to taxes.
It has been great speaking with you, and we are here to help. Reach out any time. Let’s get your taxes in order!