Americans Living Overseas & Tax Filing

Last updated on February 3, 2023

The tax filing season has started and U.S. citizens living overseas are required to file their tax returns in the U.S. even though they live in a different country. Though U.S. citizens in foreign countries have had to file U.S. tax returns for years, it is only after the introduction of Foreign Account Tax Compliance Act (FATCA) that the IRS began to make serious efforts to compel foreign financial institutions (FFIs) and U.S. citizens living abroad to report to the U.S. government.

This tax season, U.S. citizens living overseas will need to prepare and file taxes to avoid the heavy penalty that the IRS charges for non-compliance. Along with individual taxpayers, certain FFIs will also need to report to the IRS. Because the IRS has been making major developments in curbing tax evasion through FATCA, it is expected that the agency will take tax non-compliance seriously this tax season.

Americans who are living abroad and have dual-citizenships are also required to file their U.S. tax return if they meet the income requirements for filing a tax return. Due to the complications involved in filing tax for Americans living abroad, taxpayers should familiarize themselves with their unique filing status or hire a tax preparer to prepare their tax returns.

Due to the strict compliance factors and the complexity in filing taxes in two countries, many Americans living overseas renounced their U.S. citizenship. Those who wish to keep their U.S. citizenship will need to fulfil their tax obligations in the U.S. from now on.