It’s no surprise that Americans abroad would still need to file their income taxes to the IRS because the US expects all its citizens to be tax compliant, even though they are in other parts of the world. But since the April 15, 2025 federal tax deadline has passed, US expats automatically receive an extension to June 15, 2025.
It is expected that many US expats did not reach the first filing deadline due to additional requirements needed from them and the complexities involved in living abroad.
About the US expat extension
The tax filing extension is an automatic and special provision granted to US citizens and resident aliens living abroad. It’s designed to give expats more time to prepare and file their federal income tax returns.
It moves your filing deadline from April 15 to June 15, 2025. However, it does not extend the deadline for paying taxes, so be careful about this. Interest accrues on unpaid taxes after April 15.
Step-by-step filing process for US expats
Step 1: Do you need to file?
Yes, you need to file a return if your gross income exceeds the 2025 minimum threshold for your filing status.
- Single (under age 65): US$14,600
- Married Filing Jointly: US$29,200
- Married Filing Separately: US$5
Note: This includes foreign income and self-employment income, even if it's exempt locally.
Step 2: Collect documents
You'll need both US and foreign financial records:
- Applicable US tax forms (Form 1040, 2555, 1116, 8938 etc.)
- Foreign earnings (from employment and/or self-employment)
- Local tax returns (if already filed abroad)
- Foreign bank balances (those exceeding US$10,000 during 2024)
- Housing expense records (if applicable)
- Other details of foreign taxes paid in 2024
Step 3: Choose Your Tax Benefit
US expats typically have tax benefits available to them in order to avoid or reduce double taxation between the US and their host country. They generally use one or both of the following tax benefits:
Option A: Foreign Earned Income Exclusion (FEIE) – Form 2555
US expats can exclude up to US$126,500 of foreign earned income (2024). You will need to:
- Meet the Bona Fide Residence Test (will be based on residency, ties, or intent) or
- Meet the Physical Presence Test (day count - must stay in a foreign country for 330 full days in any 12 months)
Option B: Foreign Tax Credit – Form 1116
US expats can claim a dollar-for-dollar credit for foreign taxes paid. This is the best option if you live in a high-tax country because the higher the foreign tax rate, the more FTC you can apply.
Reminder: You can’t use FEIE and FTC on the same income, but you can split if the income is high.
Step 4: Report foreign accounts and assets
The US imposes strict disclosure requirements to combat tax evasion and other crimes that can be committed. If you meet these, you will have a separate reporting requirement:
- A financial account (bank, investment, or joint accounts) with a total of over US$10,000 at any point in 2024
- Foreign assets exceeding US$200,000 (single abroad) or US$400,000 (married abroad)
You will need to file an FBAR if you meet the first criterion. It is filed separately from your tax return via the FinCEN BSA e-filing system. For the second one, you must file Form 8938 for FATCA compliance. This is attached to your federal tax return
Step 5: Convert all foreign income into USD
US expats can use:
- IRS yearly average exchange rates (published each year)
- Or Treasury Department rates (daily/yearly)
Step 6: File by June 15, 2025
US expats can file using:
- IRS direct filing tools: IRS Free File (if under income limit) or fillable forms (manual entry)
- Tax software that supports expats: Like the TopTax.Ai, a self-prep tax software made specifically for US Expats.
- CPA or Tax Advisor: This is especially useful if you have complex assets (foreign pensions, PFICs) or you have missed filing in prior years
Step 7: Request More Time - Form 4868 (Optional)
If you need beyond June 15, you can file Form 4868 for an automatic extension until October 15, 2025.
IRS Form 4868 is the Application for Automatic Extension of Time to File US Individual Income Tax Return. It gives you an additional 4 months to file your federal tax return, moving your deadline from June 15 to October 15.
Staying informed is your best asset. With thoughtful planning and timely action, you can turn a daunting tax process into a smooth and successful annual routine, no matter where in the world you call home.
