Income Tax Returns If You Work, Live Abroad
Work, Live
Abroad and
Taxes
Generally, United States citizens get taxed on their worldwide income regardless of where they reside, so a U.S. citizen living abroad may be responsible for paying U.S. taxes if they have income. On this page, we'll explore how these tax obligations apply to Americans living overseas and the options available to mitigate double taxation through credits and exclusions.
U.S. Taxes and Living Abroad
Depending on your type of income (foreign and/or U.S.), you will generally need to file a U.S. income tax return if you are a United States citizen. If you work overseas or retire in a foreign country, your income may be subject to U.S. taxes. You can often still e-file your return with a foreign address and residency; if you are owed a refund by the IRS, you will need a U.S. bank account for it to be directly deposited. Otherwise, it can be mailed to you.
Based on your situation, there may be four legal ways for you to avoid paying U.S taxes when you live abroad:
- Establish residency outside of the United States: if you pass the Bona Fide Test or Physical Presence Test, you may be able to exempt some or even all of your income from U.S. Taxes. This requires you to live, for a substantial amount of time, in a foreign country; living in a boat or yacht, for example, does not qualify.
- Claim the Foreign Earned Income Exclusion or the Foreign Tax Credit - these IRS programs allows you to reduce your taxes by offsetting your income from a non-U.S. company or by taking a credit towards your tax burden. You can only claim one of these for your income earned in the same year, per year.
- Move to any one of the U.S. territories: moving to a U.S. territory, such as Puerto Rico or the U.S. Virgin Islands, may be easier on both your tax situation and the logistics of your relocation.
- Renounce your citizenship: while drastic, you will be exempt from paying United States federal income taxes if you renounce your U.S. citizenship.
Foreign Income Forms
The U.S. has a citizenship-based tax system, meaning you pay taxes if you are a U.S. citizen, regardless of if you are a U.S. resident. If you still earn at least the standard deduction for your filing status, whether it be foreign income or U.S. based income, the IRS will expect you to file a federal tax return. Since there are many forms for foreign earned income that can get complicated; use eFile.com to prepare these so you do not have to fill them in yourself and mail them. The IRS highly recommends e-filing because it's easier, faster, and more secure than filing on paper, especially if you are residing in a foreign country.
The most notable and important foreign income forms for a U.S. income tax return are the Form 1116, Foreign Tax Credit, and Form 2555, Foreign Earned Income. These forms must be included with your return if you are a US Citizen or resident alien with income earned in another country, regardless of whether U.S. income was also earned or not. In most cases, you can eFileIT these forms online.
If you are an American citizen or U.S. resident alien living and/or working overseas, you can prepare and e-file the forms in the table below on eFile.com; see a full list of federal tax forms.
Reporting Your Foreign Income on eFile.com
If you have wages or compensation from a foreign employer, you can enter your information on the eFile App's Foreign Employer Compensation screen. The app will enter your income on the appropriate line of your 1040 form once you complete your next tax return.
You can find the forms above, the Foreign Employer Compensation eFile App screen, and other foreign income tax forms on eFile.com by clicking Review on the left side menu of your account and entering "foreign" in the "Find a federal form" search box.
Start Federal Tax Return
There are many advantages of e-filing that traditional paper tax return filing doesn't have, which include:
- Having a more accurate return - 1% error rate with electronic tax returns vs. 20% error rate with paper tax returns.
- Receiving your tax refund faster - if you choose direct bank deposit, you may receive yours in as few as 8 days!
- Getting instant notification when your return is received and is accepted by the IRS - you can also check your tax return and refund status anytime, anywhere!
- Knowing your return is submitted securely - your personal information is kept private.
- Avoiding IRS penalties - e-File early or on time to avoid late fees and pay later even if you can't afford it right away!
Here are more reasons why electronic filing is so popular.
Did you know that if you have a foreign bank account with more than $10,000, you are generally required to report this to the IRS? This is reported on FinCEN Form 114 - this form is not part of a U.S. income tax return, but is reported to the IRS via Form 8938, Statement of Specified Foreign Financial Assets. On eFile.com, we will help you report your foreign account and include the necessary information with your return based on your entries.
If you don't want to or cannot e-file your tax return, you can prepare any of the tax forms above on eFile.com, print them out, and mail them to the IRS. Find and complete federal income tax forms on eFile.com.
Where to Mail Your Tax Return If You Live and/or Work Overseas
Use this mailing address if you are a U.S. citizen or resident alien from the United States, you lived in a foreign country during the tax year, and you are unable to e-file for any reason.
As a U.S. Citizen or resident alien expecting a tax refund, mail your return to the following address:
Department of the Treasury
Internal Revenue Service Center
Austin, TX 73301-0215
USA
If you are expecting a tax refund, you can request to have your refund directly deposited into a U.S. bank account or have the IRS send a check to the mailing address on your tax return.
As a U.S. Citizen or resident alien paying due taxes or estimated taxes, mail your return to the following address:
Internal Revenue Service
P.O. Box 1303
Charlotte, NC 28201-1303
USA
See how to pay taxes on your U.S. income and foreign income. If you are including a tax payment with your mailed tax return as a U.S. Citizen or resident alien in a foreign country or you owe taxes with your return, include Form 1040-V with the payment. If you make estimated payments throughout the year, you should mail your estimated tax payments, along with Form 1040-ES, to the IRS using the address on the form of the linked page.
Related Foreign Income Information
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