There have been many recent tax developments for U.S. expatriates. It is essential for U.S. citizens residing outside the United States and those considering an expat life to understand their responsibilities as U.S. taxpayers. Allen Barron is a strong resource and service provider for U.S. expats, and those with international business interests, offshore investments, or foreign trusts.
The most important concept to understand as a U.S. expat is the United States taxes the worldwide income of U.S. taxpayers. It doesn’t matter where income is realized or where assets generating income or losses are located. It is the responsibility of U.S. taxpayers to understand all their responsibilities and obligations as U.S. taxpayers and comply with all IRS, FinCEN, and state tax requirements. Ignorance is not an excuse under the law, and the IRS has little tolerance for those who claim they were not aware of their reporting duties.
The IRS has tightened its grip upon international banking, transactions, and investment activities for all U.S. citizens. Since the enforcement of FATCA began in 2014, the IRS has established a much broader electronic integration into the information of international banks and investment houses, Foreign Financial Institutions (FFIs), cryptocurrency exchanges and wallets, as well as sovereign taxation authorities. A trove of detailed information regarding the accounts, assets, and transactions of U.S. taxpayers is flowing into the IRS daily.
Over the past few years, the IRS has significantly enhanced its ability to review this data, link it to individual taxpayers and their tax returns, and identify unreported or under-reported income, activities, and assets. 2025 brought massive changes to cryptocurrency reporting and the calculation of the basis for these assets. In essence, there is nowhere to hide income from the reach of the IRS.
These tax developments for U.S. expatriates have significantly changed the nature of living as an expat. U.S. expats also need to understand the specific reporting requirements of the FinCEN Form 114 “Foreign Bank Account Report” or “FBAR.” Any effort to shield or under-report income, as well as foreign investments and assets, may become an immediate source of exposure to taxation, penalties, interest, or criminal liability for tax evasion.
It is important to understand all filing deadlines, as well as the unique options available to U.S. expatriates regarding the taxation of income. U.S. citizens and U.S. taxpayers who reside outside of the United States almost always qualify for an automatic tax filing deadline extension to June (this year, June 16, as the 15th falls on a Sunday). An additional extension to October 15 may be requested. Tax payments are still due on April 15, regardless of any filing extension that may be granted.
Investigate the unique tax treaties between the United States and your country of residence. There are many opportunities to avoid “double taxation” (paying tax on the same income to more than one sovereign tax agency), such as the Foreign Tax Credit (FTC) or the Foreign Earned Income Exclusion (FEIE) that allows up to $126,500 of offshore income to be excluded from U.S. income tax. The FEIE can be combined with other options, such as the Foreign Housing Exclusion, to reduce taxable income.
However, the FEIE is not typically the best option for individuals with substantial passive income, as it excludes any credit or deduction for foreign taxes on the excluded income. Additionally, if the FEIE is revoked, the U.S. taxpayer will be unable to claim this exemption for five years without obtaining IRS approval. There are several additional issues regarding a Passive Foreign Investment Company (PFIC), the structure of foreign retirement systems, as well as a substantial difference in the standardized accounting methods used in the United States (GAAP) versus those in Europe and most other countries worldwide. These tax developments for U.S. expatriates are why it is important to work with Janathan Allen, an experienced international tax attorney to evaluate and identify the options that best suit your unique circumstances.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470. We also invite you to visit our “Expatriate Information Hub” to help guide you to the information you require.
