So, you made the leap! You're living abroad, maybe chasing a career, raising a family, or simply enjoying a new lifestyle. It’s exciting, rewarding, and full of discovery.

But if you’re like most expats, there comes a moment when that excitement is interrupted by a familiar worry:
“Wait… what am I supposed to do about my U.S. taxes?”

It turns out, tax obligations don’t end when your boarding pass gets scanned. In fact, for many Americans overseas, tax compliance becomes even more complicated. Between foreign income, international bank accounts, and state residency issues, it’s easy to feel overwhelmed or unsure where to begin.

At O’Brien & Panchuk, LLP, we work with Americans across the globe, high-net-worth expats, entrepreneurs, diplomats, and business owners with offshore operations, who all have one thing in common: they’re trying to stay compliant without losing sleep over it.

We hear these questions every day from people just like you. So, we’ve compiled the Top 10 concerns we help clients navigate along with the smart, strategic ways we help solve them.

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1. The "Surprise!" Tax Return: "I didn’t realize I still had to file U.S. tax returns!"

This is perhaps the most common 'aha!' moment for U.S. expats. Whether you're earning in yen in Tokyo, euros in Paris, or pesos in Manila, if you're a U.S. citizen or a green card holder, the IRS still expects you to file a yearly tax return. Many assume moving abroad severs this tie, but it doesn't!

How We Help: No judgment, just solutions. We start by understanding your current situation, whether you're up-to-date or need to catch up on years of missed filings. The good news? The IRS offers various programs, like the Streamlined Filing Procedures, designed to help you get compliant without facing severe penalties. We'll guide you through the entire process, step by step.

Pro Tip: Don't wait until the IRS sends a letter! Proactively addressing missed filings can save you significant stress and potential penalties down the line.

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2. The Double Whammy Fear: "Am I going to get taxed twice?"

This is a perfectly valid and often terrifying question. The idea of tax compliance to two different governments on the same income can feel incredibly unfair. The short, reassuring answer? Not if you plan correctly!

Both the U.S. and many other countries have sophisticated systems, primarily through tax treaties and specific provisions, to prevent true double taxation. But these aren't automatic; they require careful application.

How We Help: Our expertise lies in strategically applying tools like the Foreign Tax Credit (FTC), which allows you to offset U.S. taxes with taxes paid to a foreign government. We also leverage the Foreign Earned Income Exclusion (FEIE) when applicable. We'll analyze your specific income and residency situation to determine the most beneficial approach, ensuring you keep as much of your hard-earned money as possible.

Key Takeaway: Proper planning is paramount to avoiding double taxation. It's not a given, but it's entirely achievable with the right strategy.

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3. Unlocking the FEIE: "Can I use the Foreign Earned Income Exclusion?"

The FEIE is a game-changer for many expats, allowing you to exclude a substantial portion of your foreign-earned income (over $120,000 for 2024!) from U.S. taxes. This can significantly reduce your tax burden, but qualifying for it isn't always straightforward.

The IRS has strict rules regarding the 'physical presence test' or 'bona fide residence test,' including specific days spent outside the U.S. or the nature of your residency. Many expats inadvertently disqualify themselves due to misunderstandings.

How We Help: We meticulously review your travel patterns, work locations, and overall residency status to confirm your eligibility for the FEIE. We then ensure it's claimed correctly on your tax return, preventing common errors that could lead to disallowance or an audit. Our goal is to maximize your exclusion without a hitch.

Pro Tip: Keep detailed records of your travel dates, especially if you spend time in the U.S. during the year. This documentation is crucial for proving FEIE eligibility.

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4. The Mysterious FBAR: "What exactly is the FBAR—and do I really need to file it?"

The FBAR (Foreign Bank Account Report) isn't a tax form, but a critical information report. If the aggregate balance of all your foreign financial accounts (bank accounts, brokerage accounts, even some foreign pensions) exceeds $10,000 USD at any point during the calendar year, you likely need to file it.

The penalties for failing to file an FBAR can be severe, far more so than for a missed tax return, sometimes even reaching into six figures, which is why this is such a common and serious concern. ‍

How We Help: We seamlessly integrate FBAR preparation into your overall tax compliance strategy. We'll identify all accounts that need to be reported and ensure the form is filed accurately and on time with FinCEN (the Financial Crimes Enforcement Network). If you have missed past FBARs, we're experienced in navigating the delinquent FBAR submission procedures, often helping clients avoid penalties through voluntary disclosure programs.

Key Takeaway: Don't overlook the FBAR! It's a separate requirement from your tax return, and missing it carries significant penalties, even if no tax is owed.

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5. Decoding FATCA: "What’s FATCA? Is that different from the FBAR?"

Yes, it is different from the FBAR, and often even more confusing! FATCA (Foreign Account Tax Compliance Act) is an IRS law that requires U.S. citizens and green card holders to report certain foreign financial assets on Form 8938 directly with your tax return.

The reporting thresholds for FATCA vary widely based on your filing status and whether you reside in the U.S. or abroad (they are much higher for expats). This law also compels foreign financial institutions to report U.S. account holders to the IRS, which is why your foreign bank might be asking for a W-9!

How We Help: We act as your guide through the FATCA maze. We'll determine if Form 8938 applies to your situation, help you gather the necessary financial details, and ensure it's accurately filed with your annual tax return. If your bank is asking you for W-9s or IRS forms, we’ve got you covered there too.

Pro Tip: FATCA is the reason many foreign banks are now asking for your U.S. tax ID. It's best to be proactive and understand your reporting obligations.

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6. Self-Employment Shock: "I’m self-employed abroad—do I still owe U.S. Social Security?"

If you're an entrepreneur or freelancer living overseas, congratulations! But here's a common surprise: you're typically still subject to U.S. self-employment (Social Security and Medicare) taxes, even if you're contributing to a foreign social security system.

This can feel like an unexpected financial hit, especially when you're already managing your business from a new country.

How We Help: This is where Totalization Agreements become your best friend. The U.S. has agreements with several countries to prevent double Social Security taxation. We'll determine if your host country has one and if you qualify for an exemption from U.S. self-employment tax. If not, we explore other strategic deductions and planning opportunities to mitigate the burden.

Key Takeaway: Don't assume your foreign contributions exempt you from U.S. self-employment tax. A Totalization Agreement is key, and we can help you check if one applies to your situation.

7. The Persistent State: "Why is my old U.S. state still sending me tax notices?"

You have moved! You're living abroad, perhaps for years. So why is your old U.S. state tax department still sending you notices? States like California, New York, and Virginia are notoriously aggressive in asserting residency, even for former residents who've clearly moved overseas.

This can feel like being haunted by a 'ghost residency,' leading to unexpected tax bills and administrative headaches.

How We Help: We work with you to establish a clean break from your former state of residence. This involves strategically documenting your exit: changing driver licenses, canceling voter registrations, updating professional licenses, and severing key financial and personal ties. Our goal is to create a clear, documented case that you are no longer a resident in the eyes of your former state, protecting you from lingering tax obligations.

Pro Tip: A physical move isn't always enough to sever state tax residency. You need to formally and comprehensively cut ties to avoid future surprises.

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8. The Retirement Reality Check: "My foreign retirement plan isn’t tax-deferred?"

This can be a truly disheartening discovery for expats. Many assume their foreign pension or retirement savings account (like a UK SIPP, Australian Superannuation, or Canadian RRSP) will receive the same tax-deferred treatment as a U.S. 401(k) or IRA. Unfortunately, the IRS often views these foreign accounts differently.

This means your growth within the account might be taxable annually, or distributions could be treated unfavorably, leading to unexpected tax liabilities.

How We Help: We specialize in analyzing the specific tax treatment of various foreign retirement and savings plans under U.S. tax law. We'll identify any potential reporting requirements (and yes, there are often special forms like Form 3520 or 8621 involved) and strategize to minimize U.S. tax on growth or distributions, often leveraging tax treaties to avoid double taxation.

Key Takeaway: Don't assume your foreign retirement plan offers the same U.S. tax benefits as a domestic one. Early consultation is crucial to understand and plan for potential tax implications.

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9. The Housing Bonus: "Can I deduct my rent or housing expenses?"

If you qualify for the Foreign Earned Income Exclusion (FEIE), there's a fantastic bonus often available: the Foreign Housing Exclusion (or Deduction). This allows you to exclude even more of your foreign income from U.S. taxes by accounting for your overseas housing expenses.

However, it's not a blanket deduction. There are specific base housing amounts, and the maximum exclusion varies significantly by location, designed to account for the cost of living in various cities. It's particularly impactful in high-cost cities like London, Tokyo, Hong Kong, and Zurich.

How We Help: We'll meticulously calculate your eligible housing exclusion based on your specific foreign city and actual housing costs (rent, utilities, etc.). We ensure you leverage this often-overlooked provision to its maximum potential, putting more money back into your pocket.

Pro Tip: The Foreign Housing Exclusion can significantly amplify the benefits of the FEIE. Make sure your tax preparer understands how to apply it correctly for your specific location.

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10. The Ultimate Exit: "If I renounce my citizenship, will I owe an exit tax?"

Renouncing U.S. citizenship is a momentous decision, and for some, it comes with a significant final tax hurdle: the exit tax. This isn't a universal levy; it primarily impacts 'covered expatriates' – those with high net worth, substantial income, or who haven't been compliant with U.S. tax obligations.

The calculation can be complex, involving a hypothetical sale of worldwide assets, and can result in a considerable tax bill.

How We Help: Before you even consider renouncing, we perform a thorough, confidential exit tax analysis. We'll assess your assets, income, and past compliance to determine if you would be deemed a 'covered expatriate' and what potential tax liabilities you might face. If an exit tax is likely, we will help you plan strategies to mitigate it. If not, we ensure your renunciation process is financially and legally smooth, giving you complete peace of mind.

Key Takeaway: Renouncing citizenship is a complex decision with significant tax implications. Never proceed without a comprehensive exit tax analysis by an expert.

One Last Thought: You Don't Have to Navigate This Alone.

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We've seen it all working with U.S. expats from bustling metropolises to remote islands. The U.S. tax system for those living abroad is undeniably complex, often leaving even the most organized individuals feeling overwhelmed.

But here's the crucial takeaway: you don't have to figure it out alone. At O'Brien & Panchuk, LLP, our mission goes beyond just filing forms. We're your dedicated partners, providing the clarity, strategic guidance, and ultimate peace of mind you need to confidently manage your U.S. tax obligations while living your best life overseas.

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Whether you're new to the expat tax world, need to catch up on past filings, or want to optimize your current strategy, we are genuinely on your side.

Ready to move forward with confidence?

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Have questions about your unique situation? We invite you to reach out. We're always happy to have a conversation, assess your needs, and help you take the intelligent next steps.