Millions of U.S. citizens are living outside the United States — for work, retirement, study, or lifestyle. But despite the freedom and adventure that comes with life overseas, many Americans abroad share one thing in common: they don’t fully understand the financial, tax, and legal responsibilities that continue to follow them long after they leave U.S. soil.
From ongoing IRS filing requirements to foreign account reporting rules, there are critical facts many expats don’t discover until it’s too late.
U.S. Taxes Do Not End When You Move Abroad
Most Americans assume that once they live abroad, work locally, and pay taxes in another country, their obligation to the United States ends. But the U.S. is one of the few countries in the world that uses citizenship-based taxation.
That means:
- U.S. citizens must file a U.S. federal tax return every year, no matter where they live
- All worldwide income — salary, freelance income, dividends, rental income, crypto gains — must be reported
- Green card holders abroad are also treated as U.S. taxpayers
Even if you haven’t lived in the United States for decades, even if you have no U.S. bank accounts or property, your tax responsibilities remain active.
Foreign Bank Accounts May Trigger Mandatory Reporting
Another major area where expats get surprised is foreign bank account reporting.
If you have foreign bank or investment accounts that — combined — exceeded $10,000 at ANY time during the year, you must file:
- FBAR (FinCEN Form 114) – submitted electronically
- Possibly Form 8938 under FATCA, if foreign assets exceed higher thresholds
Failing to file FBAR can result in penalties of $10,000 per year — or more.
You Might Not Actually Owe U.S. Tax — But You Must File
The IRS provides tools to prevent double taxation — but most expats don’t even know they exist:
| IRS Provision | What It Does |
| Foreign Earned Income Exclusion (FEIE) | Can exclude up to ~$135,000 of foreign-earned income (2026) |
| Foreign Tax Credit (FTC) | Gives credit for income taxes paid to another country |
| Foreign Housing Exclusion | Allows exclusion of qualifying housing expenses overseas |
Many Americans abroad pay taxes twice only because they never claimed the exclusions they’re eligible for.
Crypto and Foreign Investments Are Still Taxable
Foreign investment income does not escape the IRS. Most expats don’t realize they must report:
- Foreign brokerage accounts
- Overseas real estate rental income
- Interest and dividends earned outside the U.S.
- Cryptocurrency trading — even on foreign crypto exchanges
The IRS receives data-sharing reports from many foreign banks under FATCA, and enforcement has increased.
Deadlines Still Apply — Even If You’re on the Beach
Living abroad gives an automatic 2-month tax extension — June 15 instead of April 15 — but the obligation is still there.
Late filing and late payment penalties can stack quickly if ignored.
Why So Many Americans Abroad Aren’t Compliant
Common reasons people fall behind include:
- “Nobody told me.” – Most expats leave the U.S. with no briefing on tax duties
- “I haven’t filed in years — now I’m scared to start.”
- “I thought paying tax overseas was enough.”
- “I didn’t know FBAR existed.”
The good news: there are IRS programs designed to help expats catch up without penalties, such as the Streamlined Filing Compliance Procedures.
What To Do Next
If you’re living abroad now — or planning to relocate — here’s what to do:
- Confirm whether you’ve filed U.S. returns in recent years
- Gather income records, bank statements, and foreign account totals
- Learn whether FEIE or FTC would reduce your U.S. tax
- Consider speaking to a U.S. expat-focused CPA or tax adviser
You don’t need to panic — you just need to get informed.
Final Word
What most Americans abroad don’t know is simple:
The IRS still expects you to file.
Whether you owe tax is a different question — but failing to understand the rules can cost you far more than compliance ever would.
Being informed is the first step. Acting early is the next. With preparation and guidance, you can live abroad freely — without tax surprises shadowing the new life you’ve worked so hard to build.