Why U.S. Citizens Abroad Must File U.S. Taxes
Unlike most countries, the United States employs a citizenship-based taxation system, meaning that U.S. citizens and Green Card holders are required to file U.S. taxes regardless of their country of residence. If a taxpayer’s gross income exceeds certain thresholds, they must file a U.S. tax return. For instance, single filers earning over $14,600 in 2025 must file their U.S. taxes.
April 15: Payment Deadline for U.S. Expats
For most taxpayers, April 15 is the established deadline for submitting tax returns. However, for U.S. expats, this deadline primarily concerns paying any taxes owed. Taxes must be settled by this date to avoid additional penalties and interest. This rule applies to U.S. citizens both abroad and within the U.S.
Why might a U.S. expat owe taxes? Here are a few common scenarios:
– Self-Employment Tax: U.S. expats living in countries without a Totalization Agreement may face self-employment tax obligations in both the U.S. and their host country, which can result in double taxation.
– Foreign Earned Income: If a U.S. expat’s foreign income exceeds the exclusion amount of $126,500, they may still owe taxes if the local tax rates are lower than those of the U.S.
It’s critical to ensure taxes are paid by April 15 to avoid interest charges and penalties. This takes precedence over filing the return itself.
June 15: Automatic Filing Extension for U.S. Expats
For U.S. expats who don’t owe taxes but need extra time to file, there’s an automatic two-month extension to June 15. This provides additional time for gathering necessary international documents and preparing the return. If more time is needed beyond June 15, taxpayers can request an extension until October 15.
However, this extension applies only to the filing deadline; any taxes owed must be paid by April 15 to avoid penalties.
October 15: Extended Filing Deadline
U.S. expats can request an extension until October 15 by submitting Form 4868 before the June 15 deadline. This extended deadline is especially useful for individuals with more complex tax situations, such as those with significant assets or multiple income streams. The extension is available to anyone who needs more time to file.
Again, this extension is for filing purposes only; any taxes due must be paid by April 15.
October 15: FBAR Deadline
The deadline for submitting the Foreign Bank Account Report (FBAR) is April 15, but a six-month automatic extension pushes this to October 15. U.S. expats must file an FBAR if the total balance of all foreign financial accounts exceeds $10,000 at any point during the year, even briefly.
While the FBAR is not filed with the IRS, it is sent to the Financial Crimes Enforcement Network (FinCEN). To streamline the process, tax software like MyExpatTaxes can help users file both their FBAR and U.S. tax return at the same time.
November: IRS E-Filing Shutdown
The IRS temporarily suspends its e-filing system from mid-November to mid-January each year for maintenance. During this period, U.S. taxpayers are unable to e-file, which can lead to delays if taxpayers miss the filing deadline. To avoid complications and potential penalties, it is best to file returns before mid-November.
December 15: Late Filing Extension
If additional time is needed after October 15, a further extension until December 15 may be possible. However, this extension is not automatic; expats must submit a written request to the IRS, detailing why more time is needed. This extension is generally granted for unusual or complex situations, such as delays in document collection.
Requests should be submitted well in advance of the October 15 deadline to ensure timely processing and to avoid penalties.
Avoiding Expat Tax Penalties
Failure to meet tax obligations can result in severe penalties, including:
– Failure to File: A 5% penalty per month, up to a maximum of 25%, on unpaid taxes if the return is late.
– Failure to Pay: A 0.5% penalty per month on unpaid taxes, capped at 25%.
– Interest on Unpaid Taxes: Interest will accrue on any overdue tax balances.
– Failure to File FBAR: Failing to file an FBAR can result in penalties of up to $5,000 per violation.
Streamlined Procedure: Catching Up on Past Filings
For U.S. expats who were unaware of their filing obligations, the Streamlined Procedure allows them to catch up on overdue tax returns and FBARs without incurring penalties. Expats can file three previous tax returns and up to six FBARs to bring themselves into compliance. Specific eligibility requirements must be met to qualify for this program.
State Taxes for Expats
While living abroad, some U.S. expats may still be required to file state taxes. States like California, New York, and Virginia have aggressive residency rules, and expats in these states may need to file state income taxes depending on their ties to the state or U.S.-based income. Each state has its own deadlines, so it’s essential for expats to check with their state’s official tax website for specific requirements.
By staying informed and meeting key deadlines, U.S. expats can avoid penalties and ensure compliance with both federal and state tax obligations.