U.S. citizens and resident aliens abroad generally remain subject to U.S. tax on worldwide income. Whether a return is required depends on filing thresholds, status, income type, self-employment income, and other rules, not location alone.
Foreign exclusions, deductions, and credits can reduce double taxation, but they do not automatically eliminate U.S. tax or information-reporting obligations. Eligibility, sourcing, treaty positions, and filing elections must be analyzed together.
Avoiding double taxation
Two major mechanisms prevent you from being taxed twice on the same income:
- Foreign Earned Income Exclusion (FEIE, Form 2555), lets qualifying expats exclude a large amount of foreign-earned income, if you meet the bona fide residence or physical presence test.
- Foreign Tax Credit (Form 1116), gives you a dollar-for-dollar credit for income taxes paid to a foreign country.
Choosing between (or combining) these correctly is where expert foreign income reporting makes a real difference.
FBAR and FATCA
These two reporting requirements catch many expats off guard:
- FBAR (FinCEN Form 114), required if your foreign financial accounts total more than $10,000 at any point in the year. See our FBAR guide.
- FATCA (Form 8938), filed with your return when foreign assets exceed certain thresholds.
Penalties for missing these are steep, so it’s worth getting right.
Behind on filing?
If you did not know you had a filing obligation, do not submit a corrective filing before evaluating the available procedures. The IRS Streamlined Filing Compliance Procedures have detailed eligibility, certification, return, and payment requirements and are intended for qualifying non-willful conduct; penalty treatment depends on the applicable domestic or foreign procedure and the facts.
Green card holders
Permanent residents are taxed as U.S. residents on worldwide income, even while living abroad, until the green card is formally abandoned, which has its own tax consequences.
Living abroad and unsure where you stand? Our expat tax specialists can help. Book a consultation today.
Create one timeline for your cross-border review
Record where you lived and worked, your travel dates, changes in status, and the tax periods covered by foreign returns. Prepare a separate inventory of accounts, investments, pensions, and business interests. This helps advisers see information gaps and coordinate the U.S. and foreign-country questions. Do not omit an account or income source simply because it did not generate a U.S. tax form.
General educational information, not an individual tax opinion. The applicable year, jurisdiction, and facts must be reviewed before acting.