Every year in the United States, tax season begins in late January and for 2025, the Internal Revenue Service (IRS) expects around 140 million taxpayers to file their returns.
Among the taxpayers are US citizens living abroad, who still have to pay US taxes. Even if you have left US shores and have not set foot in the country for years, the IRS still expects you to file a tax return and report your worldwide income.
“If you are a U.S. citizen or resident alien and live or travel outside the United States, you generally must file income tax returns, estate tax returns and gift tax returns and pay estimated taxes in the same way as those who reside in the United States,” IRS reports on its website.
While other nations typically adopt territorial or residence-based tax systems (by taxing individuals only on income earned within their borders), the United States remains among the few that adhere to citizenship-based taxation.
Can Americans abroad avoid filing taxes?
Failure to comply with these tax obligations can have consequences such as penalties, accrued interest and legal ramifications.
In the current tax landscape, renouncing US citizenship is the only way to escape these obligations.
This means that filing a US tax return is a requirement that cannot be avoided, even if all of your income comes from a foreign jurisdiction and you have not traveled to the United States in a long time.
U.S. Expat Tax Filing Requirements
The IRS stipulates that the U.S. citizen living abroad should be aware that gross income includes all income received in the form of money, goods, property and services that is not exempt from tax
In addition, it is necessary to report bank and financial accounts through the FinCEN 114 Report if an investment exceeds $10,000 at any time during the calendar year. It is clarified that this procedure should not be carried out “if the assets are in a U.S. military banking facility operated by a U.S. financial institution or if the combined assets in the account(s) are $10,000 or less throughout the year.”
It is worth noting that thanks to tax treaties and expatriate tax benefits, they are likely to owe nothing, however, either way, it is a mandatory requirement for US citizens living abroad to file their annual tax return.
On the other hand, taxpayers living abroad who fall behind on their tax payments can use the IRS amnesty program to catch up, even if they have missed the process for a long time, they only need to file the last three years.