What should residents know about filing taxes after moving abroad?

Moving overseas changes many practical things in your tax life, but it rarely eliminates the obligation to file a U.S. tax return. U.S. citizens and resident aliens must generally report worldwide income to the IRS each year and should evaluate available exclusions, credits, reporting requirements and filing deadlines to reduce tax and compliance risk.

Below I walk through who is affected, the key forms and tests you’ll meet, common pitfalls I see in practice, and practical steps to get compliant. I’ve guided clients through relocations to Canada, Germany, Australia and beyond — the same core rules keep applying, even when foreign withholding or local tax rules look very different.

Who must file when they move abroad?

  • U.S. citizens and resident aliens (green card holders) generally must file Form 1040 and report worldwide income regardless of where they live. (See IRS International Taxpayers guidance.)
  • Nonresident aliens are taxed differently and typically report U.S.-source income only.
  • Some low-income taxpayers may not meet filing thresholds, but many still have informational-reporting obligations (FBAR, Form 8938) even when no tax is due.

Authoritative source: IRS — Taxpayers Living Abroad (see the IRS’s International Taxpayers pages and Publication 54 for details).

Key forms and rules you’ll encounter

  • Form 1040: Annual U.S. income tax return reporting worldwide income.
  • Form 2555 (Foreign Earned Income): Use to claim the Foreign Earned Income Exclusion (FEIE) and the housing exclusion/deduction. Read the official Form 2555 guidance and instructions carefully.
  • Form 1116 (Foreign Tax Credit): Use to claim credit for foreign income taxes paid if you don’t (or can’t) fully exclude income under the FEIE.
  • FinCEN Form 114 (FBAR): File if you had aggregate foreign financial accounts over the reporting threshold during the year. This is filed electronically with FinCEN (not the IRS). See FinCEN BSA E-Filing.
  • Form 8938 (FATCA reporting): File with Form 1040 if you meet the FATCA asset thresholds.

For help on eligibility and steps to claim FEIE, see FinHelp’s guide on How to Qualify for the Foreign Earned Income Exclusion. For details on completing the FEIE paperwork, see our Form 2555 — Foreign Earned Income.

How the main tax tools work (FEIE, foreign tax credit)

  • Foreign Earned Income Exclusion (FEIE): If you meet either the physical presence test (330 full days in any 12-month period) or the bona fide residence test (residence in a foreign country for an uninterrupted period that includes an entire tax year), you may exclude qualifying foreign earned income. The exclusion is adjusted for inflation each year; check the IRS Form 2555 instructions for the current limit.

  • Foreign Tax Credit (FTC): The FTC (Form 1116) reduces U.S. tax when you pay taxes to a foreign government on income also taxed by the U.S. You can choose between claiming the FEIE, the FTC, or a mix of both for different types of income. Choosing the better option depends on your income types, foreign tax rates and planning goals. See FinHelp’s primer on the Foreign Tax Credit.

In practice, I often run both FEIE and FTC scenarios for clients. For example, high foreign social contributions, surtaxes and employer-provided housing can make the FTC preferable for certain income mixes.

Filing deadlines and extensions

  • Automatic 2‑month extension to file: U.S. citizens living abroad generally get an automatic extension to June 15 to file (and pay) tax returns, but interest accrues on any tax not paid by the usual April deadline. You can request an additional extension to October 15 by filing Form 4868 if needed.
  • FBAR deadline: The FBAR (FinCEN Form 114) is due April 15 with an automatic extension to October 15; check FinCEN guidance for current details.

Missing deadlines can lead to interest and penalties — I advise clients to calendar both federal filing and FinCEN deadlines as soon as they relocate.

State tax residency — don’t forget state rules

Your state residency status can create continuing state tax obligations after you move. States vary: some consider you a resident until you take specific steps (driver’s license, voter registration, selling a home), while others have statutory rules. In my practice I always review state severance factors and maintain evidence (bills, lease, employment records) proving a change of residence to reduce future audits or unexpected state assessments.

Reporting of foreign accounts and assets

  • FBAR (FinCEN Form 114) for aggregate foreign accounts over the threshold.
  • FATCA (Form 8938) for specified foreign financial assets exceeding IRS thresholds.

Failing to file these informational returns can trigger steep penalties. If you missed filings in prior years, look into the IRS Streamlined Filing Compliance Procedures or the Voluntary Disclosure practice if civil or criminal exposure is likely; see FinHelp’s article on Streamlined Foreign Offshore Procedures for an overview.

Common mistakes I see

  • Assuming moving abroad eliminates U.S. tax filing obligations.
  • Misapplying the FEIE — it only covers earned income (wages, salary, self‑employment income) and not passive income like dividends or capital gains.
  • Forgetting FBAR/FATCA reporting even when U.S. tax isn’t due.
  • Failing to consider state residency rules — leaving a state for federal purposes doesn’t always stop state tax liability.
  • Not documenting the physical presence or bona fide residence tests adequately.

A client moving to Australia assumed the FEIE would eliminate all U.S. filing. They excluded their salary with Form 2555 but still needed to report dividends and rental income — these remained taxable or creditable depending on circumstances.

Practical checklist for residents who moved abroad

  1. Determine your filing obligation for federal and state taxes for the year you moved.
  2. Gather records: foreign pay stubs, contracts, bank statements, dates of travel, rental or home sale documents.
  3. Decide whether to claim FEIE (Form 2555) or FTC (Form 1116) for the tax year; model both where appropriate.
  4. File timely FBARs and Form 8938 if thresholds are met.
  5. Keep a clear audit trail showing severance of state residency: utility bills, lease, voter registration, and employer location.
  6. If you missed prior filings, evaluate Streamlined procedures or consult a tax professional immediately.

When to amend returns or correct mistakes

If you discover missing foreign income or omitted reporting, you may need to file an amended return (Form 1040-X) and amend FBAR filings where applicable. For voluntary late compliance, the Streamlined Filing Compliance Procedures can provide a pathway with reduced penalties for eligible taxpayers who did not willfully fail to file.

See our FinHelp pages on amending returns and the streamlined options for more on timelines and documentation.

Sources and further reading

Professional disclaimer: This article is educational and does not constitute personalized tax advice. Tax law changes and individual situations vary. For tailored guidance, consult a qualified tax professional with experience in expatriate and international tax matters.

If you’d like, I can summarize the specific forms and timelines that apply to a typical employee, contractor or landlord living abroad, or provide an anonymized checklist for a given country.