US Income Tax Forms For Citizens Living Abroad

“The only things certain in life are death and taxes.”
– Benjamin Franklin

Why Do US Citizens Living Abroad Need to Pay Taxes?

If you are a US citizen living abroad, you still have to file taxes in the US. Wherever you reside, the US government wants to know all your income. You may not necessarily have to pay your taxes twice – in the US and your country of residence – but you definitely have to file them in the US as well.

If you are a US citizen or resident alien residing or moving outside the United States, you should typically file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States. Your income, filing status, and age normally decide whether you should file a return.

Only two nations, the United States and Eritrea, implement citizenship-based taxes, while the majority of the 244 sovereign territories use territorial, residential, or no-income taxation.

What Are The Other Types of Taxation?

When taxing personal income, it is safe to assert that the United States takes a unique approach to other nations that tax income.

The governments widely use two taxation systems- territorial-based and residence-based taxation.

Territorial-based taxation is a taxing system used in countries like Singapore and Lebanon, which tax people’s earnings within the country’s borders.

Residency-based taxation is a method that several nations like Germany and France employ to tax residents on all income generated from domestic and foreign sources. Like the territorial-based system, the government exclusively levies local income taxes on non-residents.

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Living Abroad: How Does It Mitigate US Taxes?

While living abroad, it is crucial to use tax exclusions and credits to lessen your US tax liability.

One might be curious about how much overseas income is untaxed in the USA – and the IRS provides for citizens living abroad various tax frameworks to compensate for possible double taxation (paying taxes both in the home country and in the US).

How Much Tax Should You Pay If You Work Overseas?

Chances are that you won’t owe any taxes to the US government

Form 1116:
If you are a US citizen living abroad, you must file a tax return annually like every resident American unless your income is below the minimum threshold. Being an expat, you can fill the Form 1116 to claim your foreign tax credit living abroad and lower your US burden. Through this form, you can claim your Foreign Tax Credit (FTC).

Form 3520-A:
There are also information return forms like Form 3520, where an expat reports transactions with international trusts and receipts of foreign gifts. After filling out this form, you do not owe any tax to the IRS. If you are a trustee of a foreign trust with U.S. taxpayer beneficiaries, then you can fill the Form 3520-A.

Pro-Tip: The above two forms are very complicated to fill.

Form 3520:
The beneficiary or recipient of the income must submit Form 3520. Conversely, if Form 3520-A is required, filing it is the responsibility of the trustee.

You can also utilise international tax treaties to save substantial income from US taxes.

Best is to always count on US Tax Pros for your maximum tax return.

US Tax Pros was established to give Americans living abroad an easy and stress-free approach to paying taxes. It is based in Auckland, New Zealand and provides tax preparation and tax advisory services. Cognizant of the complexities and nuances of a US citizen’s tax filing responsibilities while living abroad, it will help you with all your taxation issues.

There are even additional tax benefits for expats, like the Foreign Housing Exclusion, which allows Americans living abroad to deduct residential costs in the US. You should fill the form 2555 for the tax return on that.

You May Be Eligible For A Tax Refund Via The Additional Child Tax Credit

Schedule 8812 (Form 1040):
You may even be eligible for a tax rebate if you have kids. A maximum of $3,000 per child is claimable on a 2021 tax return by parents living abroad and whose children have an American social security number in 2022.

However, remember that the USD $3000 sum is only available to people with a domicile in the US for more than half of 2021.

Do not worry if you were an expat for the entire year; you can still claim a refund, but not for the full $3,000.

After claiming any applicable credits and exclusions, if you still owe taxes, the Child Tax Credit will be used to lower your overall tax liability. Furthermore, the Additional Child Tax Credit allows you to claim the extra amount as a refund if you have hit zero after utilising the exclusions and credits indicated above.

US Expats Receive An Automatic Extension

Form 4868:
Yes, an automatic extension. For Americans living abroad, the regular tax filing date of April 15 is automatically extended by two months. Therefore, you have time till 15th June to compute those figures.

Do you still need more time? No problem. You can extend your deadline to file your tax return until October 15 by merely filing another extension request.

Of course, make sure you read the IRS’s fine print. Any extensions granted are only for filing, NOT for the payment of taxes. Pay the tax back before the final date if you owe taxes to avoid interest or delayed payment penalties.

You May Need To File An FBAR

Americans must file an additional report known as an FBAR, or Foreign Bank Account Report, if they had a minimum of $10,000 in overseas accounts at any point in the past year. If the amount of your foreign accounts exceeds $10,000, irrespective of the number of accounts you have, you must report all accounts.

Exactly what sort of overseas accounts? If applicable, include any international savings, checking, pension, and investment accounts. Even if the account is not in your name, it is crucial to remember to mention any account for which you have signature permission.

Filing a tax return is a hectic and tiring process. You can always take the help of already established experts in the field.

US Tax Pros are real tax experts. It is committed to minimising your tax liability while preserving your entire compliance with the IRS. Its mission is to deliver superior tax services along with outstanding customer service. It values its customers, and there are no hidden costs in its fair and honest pricing.

You Must Report Your Foreign Business

Furthermore, you must disclose your interests if you own a foreign-registered LLC or corporation.

There are a few elections you might need to make during incorporation, and reporting foreign enterprises might be challenging. If you want to opt to have their Foreign Corporation or Partnership ignored, Form 8832 could be helpful.

If an American owns more than 10% of that corporation, they may have to disclose it on Form 5471. You must declare your international business as effectively as possible if you hold more than 50% of a foreign entity to avoid double taxes.

You may also need to file state taxes. Furthermore, if you spend less than 35 days in the US, the IRS can exclude your income and consider you an expat.

Do things sound complicated? Fear not. For Americans living abroad, US Tax Pros has created a unique tax filing approach that makes things simple. The experts at US Tax Pros are there to assist you if you need assistance filing or modifying your tax returns, advice on claiming stimulus funds, or even simply general inquiries regarding expat taxes.

As an expat, filing your taxes can be challenging, and the expenses of filing documents incorrectly can add up quickly. US Tax Pros excels in the preparation of forms needed by many expats living in New Zealand such as:

  • Form 3520, Form 3520-A
  • Form 5471
  • Form 2555, Form 8938
  • Form 1116

They employ an intuitive cloud-based system, and all their tax returns are examined by qualified tax experts. Additionally, US Tax Pros is a certified e-file service, and files return online whenever possible. For quicker refunds and processing, the IRS advises people to file digitally.

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What Happens If US Citizens Do Not File Taxes While Living Abroad?

If US citizens fail to file US taxes while living abroad, they may face fines, interest charges, or possibly legal implications. Late filing and late payment are both subject to penalties from the IRS. If your lack of filing is deliberate i.e. you willingly overlooked your US tax obligations while living overseas, severe legal ramifications may apply.

  • Penalty for failure to file: 5% of the unpaid taxes for each month the tax return is late, up to a maximum of 25%.
  • Failure to Pay Penalty: 0.5% of the tax debt for every month that the tax payment is past due, up to a maximum penalty of 25%
  • Over 60 Days Late: The maximum fine is 25% of your unpaid taxes.

There is more to filing taxes than simply filling out the forms and sending them to the IRS. US Tax Pros can assist you with your taxation to lower your tax liability. Its unique tax software will let you see your tax strategy in person and assist you in taking charge of your taxes.

You can reach out to US Tax Pros through their phone at +64 27 512 0366 or via their email-

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