Filing Taxes as an Expat: What you need to know if you’re an American Abroad

I have a confession to make: before yesterday, I hadn’t filed my taxes in three years. I know this is awful, but I was honestly just too overwhelmed.

Before moving abroad, I filed my taxes every year. It was easy: I claimed 0 on my W-2 form, then when tax season rolled around, my employer gave me all the information I needed. I typed it into Turbo Tax, and then got a nice refund in the bank and treated myself to a new outfit.

Unfortunately, it’s not that easy when you move out of the country. I’m going to do my best to explain what I’ve learned over the past ten years as an expat, but first…

Here are some basics that you need to know before filing:

  • Almost every other country besides the United States taxes based on residence (meaning that if you’re living in the country, you pay taxes; if not, you don’t).
  • The US tax system is based on citizenship, meaning Americans are subject to paying taxes no matter where we’re living, if we’re making over a certain amount of money.
  • The IRS states that all American citizens and green card holders who earn more than $12,000 a year, or $400+ in “self-employment income,” are required to file.
  • Most expats will claim either a Foreign Tax Credit if they paid taxes in the country where they reside, or a Foreign Earned Income Exclusion, which can exempt expats from paying taxes on foreign salary up to $100,000.
  • If at any time during the tax year you have more than $10,000 in foreign financial accounts, you have to file a Foreign Bank Account Report, or FBAR.
  • Most expats have until June to file, as we qualify for an automatic two-month filing extension.
  • You likely won’t have to pay any taxes once you file.

If you’re like me, and these “basics” have already got your head spinning, then you can take the easy way out and hire a company like Taxes For Expats.

Full disclosure: This company reached out to me and offered me a year’s credit for this blog post. But I was really happy with their service and ended up filing three years with their company.

My Experience with Taxes for Expats

The best email I’ve gotten in awhile.

Initially, I resisted using a service, and even signed up for the more expensive version of Turbo Tax–convinced I could do it myself. But since I had let a full tax year pass, and had more than one job in one tax year, it quickly became overwhelming and I needed help.

The process began with an email from the company, introducing me to my Certified Public Accountant (CPA), who might be one of the most patient people I’ve e-met in awhile. (Let’s just say I had A LOT of questions.)

Susan had me fill out “Tax Questionnaires” for the last three years and offered a free phone consultation (included in the fee) and also an informational webinar, since, admittedly, it took me a good amount of time to fill out the information.

The trickiest part of filling out the questionnaires was getting ahold of certain information and files. Here’s what you’ll need:

  • A copy of your last filed tax return. This was pretty annoying for me to get my hands on. I tried requesting my 2015 return from the IRS, but to get an electronic copy, I needed a US phone number that was registered under my name (tried using my mother’s, but it didn’t work, despite sharing the same middle and last name). I had to get a physical copy mailed to my parents, then they scanned and emailed it to me.
  • A copy of your last filed state tax return. Now, I’m lucky in this regard, since I’m from Florida and we don’t file state taxes, so I asked the Founder and President of Taxes For Expats, Ines Zemelman, about whether people from other states need to file. “It depends,” she says. “Short answer, it’s [complicated]. State tax issues are often more complex than federal issues for expats.” She adds that they can’t really say for sure until they review all the information.
  • A copy of your annual non-US wage statement from foreign employers.
  • The amount of money you paid for rent and utilities during the tax year.
  • How much your employer paid for your residence during the tax year.
  • How many days you spent in the US during the tax year, along with entry and exit dates. *Note that if you stay in the States longer than 35 days during one tax year, you will need to pass the “Bona Fide Residency Test.” Make sure to visit this link before making your travel plans.
  • If you did any freelance or contract work, you will need to upload a document showing proof of income (which, of course, I did not have).

After I finally got all the information and documents, I sent off the questionnaires. Susan had a few clarifying questions for me–mostly about foreign financial account balances and my freelance work. Luckily I was able to just send her answers via email and she took care of the paperwork (Thank. God.).

Two days later, I received an Engagement Letter that I was asked to electronically sign (specifying the tasks Taxes For Expats performed and what it cost), I paid the remaining balance (payment info at the end of post), and the next day my documents were ready for me to review. I clicked “approve,” and six days later, my tax return was filed.

And, since I learned my lesson, I saved all of the electronic confirmation files they sent me, and they are sitting in a file on my computer (and on an external hard drive, and on!), labeled “Taxes.”

I received this image several times in my inbox throughout the process. The answer was always yes.

After all was said and done, I learned A LOT from this experience, and hope I was able to help some of you who are lost like I was. To be honest, the service is a bit expensive ($350 per year filed, with a 20% discount for multi-year filing), but to me, it was worth it.

As the company’s founder, Zemelman explains, “Expat tax is a niche business, and most licensed CPAs are not trained in this field, as they don’t come across it often.” She says that clients aren’t paying for “data aggregation” (i.e. what most online tax services offer), but for “the analysis and actual work that’s done to ensure your return is optimized and within the IRS rules.”

As always, all opinions are my own. Taxes For Expats did provide me with a free year of filing in exchange for an honest review; and I liked the experience so much I paid for the additional two years.

Please, if you have any questions, comment below and I’ll answer to the best of my ability!

2 thoughts on “Filing Taxes as an Expat: What you need to know if you’re an American Abroad”

  1. Can you please confirm if you were renumerated for this review?

    My advice to Expats is BEWARE of this company because you will be in damage control with the IRS once TFX manage your taxes. I gather that they utilize junior tax agents with no vetting of their work hence many errors. Don’t expect TFX to be accountable for major errors as they will brush you off. Ensure that you check reviews online for the truth. Be aware that they will try to block negative reviews so you will need to be thorough. I would have expected that when their leader completed tax training, that they would have completed a unit on Business Ethics successfully before offering tax services however I’m not so sure.

    1. Hi Anne, I’m really surprised to read this comment, and am really sorry you had a bad experience. I stated in my post “This company reached out to me and offered me a year’s credit for this blog post. But I was really happy with their service and ended up filing three years with their company.” I personally had a really good experience and am planning to file with them again… curious if you can point to some of these negative reviews? Do you have a different company you suggest?

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