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Alex - The IRS has officially announced the start of tax season, and for many Americans, the looming prospect of April 15 can immediately trigger stress and overwhelm.

For Americans living abroad, that stress often comes from the realisation that the US taxes based on citizenship rather than residence, meaning US citizens and Green Card holders still need to file a US tax return each year.

Expat taxes often involve additional layers of complexity. Between foreign income, overseas bank accounts, and asset reporting with varying thresholds and deadlines, there’s a lot to manage. Throw in a foreign tax system and the very real risk of being taxed twice on the same income, and it’s no wonder many expats feel overwhelmed during tax season.   

Avoiding double taxation on foreign income

Being taxed twice on the same income by both the US and their country of residence is a genuine concern for expats. Fortunately, the IRS offers expat tax breaks designed to reduce or eliminate double taxation. Two of the most powerful examples are the Foreign Earned Income Exclusion (FEIE) and the Foreign Tax Credit (FTC), but choosing the right option depends on your individual situation.

 You need to:

• Identify which expat tax benefits you’re eligible for
• Choose the most tax-efficient option (FEIE vs FTC) based on your income sources and location
• Ensure benefits interact correctly, so you don’t miss out on potential savings or refunds

Foreign bank accounts and asset reporting 

If you live abroad, you're likely to use non-US bank accounts for everyday life. If the combined value of your non-US bank accounts exceeded $10.000 at any point during the year, you are required to file the Foreign Bank Account Report (FBAR). This includes everyday checking and savings accounts, joint accounts, and sometimes investment accounts.

Some Americans abroad may also be required to file Form 8938 under the Foreign Account Tax Compliance Act (FATCA). This form reports certain foreign financial assets once higher thresholds are exceeded.

These reporting obligations don’t all go to the same place, and filing one does not replace the other. The FBAR is filed separately with the Financial Crimes Enforcement Network (FinCEN), and FATCA is reported to the IRS as part of your US tax return. Even non-willful failures to file required FBARs can result in penalties of up to $10.000 per violation.

These reporting thresholds are based on the highest balance at any point during the year, not year-end totals. Because of this, it’s important to consistently track all foreign accounts and assets to avoid missed filings and potential penalties.

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More complex situations and business interests abroad

Expats with overseas corporations or foreign partnerships may face additional reporting requirements, including Forms 5471 and 8865. If this is your situation, it is wise to contact a tax advisor for help. 

Foreign pensions and investments

Non-US investment accounts can have unexpected US tax implications. Many expats are unaware that certain foreign investment products, such as mutual funds and even some foreign pensions held outside the US, may have additional reporting obligations, which can result in costly mistakes if reported incorrectly.

Why the April 15 deadline matters

Americans living outside the US on April 15 automatically receive a two-month filing extension, pushing the deadline to June 15.

While the extra time can be helpful, June 15 is best viewed as a buffer rather than a target deadline. Any US tax owed is still due by April 15. Being prepared by April 15 provides clarity on your tax position and flexibility if additional time is needed.

Catching up on missed filings

If you’ve fallen behind on US taxes while living abroad, the IRS Streamlined Filing Procedures allow eligible expats to catch up without penalties by filing up to three years of past tax returns and six years of FBARs.