There are a number of reasons that US citizens live aboard. Just because they are living abroad doesn’t mean they can skip filing their taxes though. Filing taxes can be complex, especially for those living abroad. Thankfully the increasing availability of online tax preparation software, virtual CPAs and IRS options, it has become much easier to file taxes online from abroad. Let’s get into the three options available for US citizens living abroad to file their taxes without having even going back to the US.
Option 1: DIY Online Tax Filing Software for Expats
The first option is to file your US taxes online using tax preparation software such as TurboTax or H&R Block. When should you use the route? It’s best to use an online software when you have a simple tax situation and some understanding of tax laws. It doesn’t always make sense if you own a business or earn income from a bunch of US states but live outside the US.
To file your taxes online, you will need to gather all your tax documents, such as your W-2, 1099, and other income statements. You will then need to enter this information into the online tax preparation software and answer some questions related to your income, expenses, and deductions. You’ll get to From 2555, where you can claim the Foreign Earned Income Exclusion if you lived outside the US and earned income outside the U.S. Keep in mind the Foreign Earned Income Exclusion doesn’t exclude you from paying foreign taxes.
The cost of filing your US taxes online on your own varies depending on the tax preparation software you choose. Make sure you compare a few software before choosing one as most have multiple filing levels like TaxSlayer or TurboTax.
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Option 2: Use a Tax Professional to File US Taxes When Living Abroad
If you prefer to have someone else handle your taxes, using a tax professional may be the best option for you. A tax professional can help ensure that your taxes are prepared accurately and in compliance with US tax laws. Provided you are only filing a federal return, you can hire a CPA in any state while living abroad. They can also provide advice on tax planning and help you take advantage of any deductions or credits that may be available to you but most importantly, apply the Foreign Earned Income Exclusion. There are many tax professionals who specialize in working with US citizens living abroad.
While any CPA can prepare your return while you live abroad you can find ones that specifically, specialize in ex-pat taxes. Ask other ex-pats you know, who are filling their taxes. Otherwise, you can just search online.
Option 3: Use the IRS Free File Program To File From Abroad
The IRS Free File program is a free online tax preparation and filing service provided by the IRS. This program is available to US citizens and residents who have an adjusted gross income of $73,000 or less in tax year 2022.
The IRS works with online tax file companies that allow you to file for free. Maybe you are a scuba instructor in the Caribbean, a retiree in Europe or traving throughout Asia, the free file program is one do-it-yourself solution you can use to file your taxes.
Factors to Consider When Choosing an Option
When choosing which option to use to file your US taxes when living abroad, there are several things you’ll want to consider before picking one of the above options. The largest driver is – how complex your tax situation is. Next should be things like your comfort level with technology, your budget, and your personal preferences.
For example, if you have a simple tax situation, using a tax preparation software may be the most cost-effective and convenient option. On the other hand, if you have a very complex tax situation, working with a CPA virtually may be the best option to ensure that your taxes get completed correctly while you live abroad.
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Common Mistakes to Avoid for Expat Tax Filers
Just because you live outside the US, it doesn’t make you exempt from filing taxes. This is the first question we often get from people living aboard. Next, it is usually a question if they need to report all their income. Failing to report all of their income, failing to claim all of their deductions and credits, and failing to file on time are all huge mistakes by ex-pat tax filers who need to be filing their US taxes.
If you want some accountability and want to limit your mistakes, get accustomed to using a CPA year after year. You’ll have someone qualified to look at your taxes and you won’t be missing any deadlines.
How to File US Taxes Online When Living Abroad: Final Thoughts
Don’t ever be scared of living abroad or give it up just for your taxes. Tons of US citizens live abroad for most of their life and still effectively file their US taxes online when living abroad. It comes down to picking one of the above options, getting help when you need it and most importantly filing on time or extending if you need to. Enjoy your life under the palm trees, in the mountains of Europe or backpacking in Asia, while still having options to complete your US taxes.
