Your deadline shifts
Living abroad on 15 April gives you an automatic two month extension to 15 June. Interest still runs from April, but the two month extension covers payment as well as filing, so paying by June avoids the late payment penalty.
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What's different abroad
What Changes When You Move Abroad
Less than most people expect. The filing thresholds are the same. What moves is the calendar and the paperwork.
You can extend further
Form 4868 takes you to 15 October, and a further discretionary extension to 15 December is available in narrow cases. That one is for filing only — payment was due in June.
Green card holders do not get a quieter version
The obligation runs until the card is formally abandoned, and long term residents who give it up can land in the expatriation rules under IRC 877A.
The choice worth the most money
The Two Ways to Avoid Being Taxed Twice
Most of the money on an expat return turns on one choice.
Foreign Earned Income Exclusion
Form 2555
Excludes a capped amount of foreign earned income. You need a foreign tax home and qualify through bona fide residence for a full tax year, if eligible, or 330 full days abroad in any twelve months.
- Income covered: earned income only, such as wages and self-employment
- Time test: bona fide residence for a full tax year, or 330 full days abroad in any 12 months
- Carryover: none
- Best when: you are in a low-tax or no-tax country
Foreign Tax Credit
Form 1116
A credit for foreign income tax you actually owed and paid. It is capped at the US tax on your foreign source income, computed by category, and any excess carries back one year and forward ten.
- Income covered: all foreign-source income, including dividends, rent, and gains
- Time test: no minimum time abroad
- Carryover: excess carries back 1 year and forward 10
- Best when: you are in a country that taxes you more heavily than the US
The rule of thumb: in a country that taxes you more heavily than the US, the credit often wins, because it reaches income the exclusion cannot and the excess is not wasted. In a country with little or no income tax, the exclusion usually wins. You cannot do both on the same dollar, because there is no credit for tax on income you already excluded.
One trap worth knowing: if you claim the exclusion and later revoke it, you generally cannot elect it again for five years without IRS consent. Switching is not a yearly toggle.
Side by side
FEIE vs. FTC at a Glance
| Foreign Earned Income Exclusion (Form 2555) | Foreign Tax Credit (Form 1116) | |
|---|---|---|
| What it does | Removes qualifying foreign earned income from US tax | Credits foreign income tax you paid against your US tax |
| Income it covers | Earned income only, such as wages and self-employment | All foreign-source income, including dividends, rent, and gains |
| Time test | Bona fide residence for a full tax year, or 330 full days abroad in any 12 months | No minimum time abroad |
| Carryover | None | Excess carries back 1 year and forward 10 |
| Best when | You are in a low-tax or no-tax country | You are in a country that taxes you more heavily than the US |
Two blind spots
What the Exclusion Does Not Do
01
Self-employment tax
You can exclude income from income tax and still owe the full self-employment charge on the same earnings. The way out is a totalization agreement, which the US holds with around thirty countries, where a certificate of coverage from the foreign system exempts you.
02
Unearned income
Dividends, capital gains, rental profit, and pensions sit outside the exclusion entirely, which is another reason the credit does more work than people expect.
No cost to start
Not sure whether the exclusion or the credit is right for you?
Talk it through with a CPA who files expat returns every day. We'll confirm which one wins in your situation — and what it costs to have us handle it.
Separate from your return
Reporting Your Foreign Accounts
Foreign asset reporting runs on two separate filings, different thresholds, and neither replaces the other. Both are information returns, not taxes — missing either carries steep penalties.
FBAR
FinCEN Form 114
Required once your foreign accounts exceed $10,000 in aggregate at any point in the year. It goes to FinCEN rather than the IRS, and the deadline is automatically extended to October. Read our full breakdown of what is FBAR.
Form 8938
Statement of Specified Foreign Financial Assets
Filed with your return. The thresholds are higher than the FBAR and higher again for taxpayers living abroad, and they move with your filing status.
State residency
Your Former State May Still Require a Return
State residency is decided separately from federal, and a few states hold on. New York can tax you under either of two tests. Leaving the country does not automatically settle either question, and an expat CPA should check both before you stop filing there.
01
Domicile
Your permanent home, which follows you until you genuinely establish a new one.
02
Statutory residence
A permanent place of abode in New York for substantially all the year plus more than 183 days in the state, where any part of a day counts as a day.
Catching up
If You Have Not Filed in Years
This is the most common reason someone goes looking for an expat CPA, and it is more fixable than it feels. The streamlined foreign offshore procedures cover taxpayers living abroad whose failure to file was not willful.
- 01
Three years of amended returns
We prepare and file three years of amended federal returns to bring your filing current.
- 02
Six years of FBARs
We file six years of FinCEN Form 114s to cover the reporting window the procedures require.
- 03
Certification of non-willful conduct
We prepare the certification statement explaining that the failure to file was not willful.
For those who meet the non-residency requirement, the penalty is waived entirely. The version for taxpayers inside the US carries a 5% penalty.
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"We are a very complicated case with living abroad and owning multiple businesses but they always handle everything with such grace, which puts us at ease during what should be a very stressful season."
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Expat & international tax services
Let's get your expat filings handled right
Understanding your filing obligation while abroad is essential for compliance and for keeping more of what you earn. Whether you are weighing the exclusion against the credit, catching up on FBARs, or years behind on filings, our team provides the guidance and support you need. Contact us today to learn more about our expat and international tax services.
