Why do Expats have to File U.S. Taxes?

When Jamie accepted a job promotion that included a move from New York to Japan, he was excited about this new chapter in his life. He didn’t have much time to make the transition, so he immediately started researching his destination, finding a place to live overseas, and packing up his belongings.

One evening, as he was working online late at night, he came across a chat board where strangers were conversing about the joys and challenges of living abroad. One user asked about taxes:

“How do I file my U.S. taxes from overseas and make sure I avoid double taxation?”

A fellow reader responded with some solid advice, but Jamie sat there with his mouth open for a minute. Wait, I still have to pay taxes to the United States, he thought to himself.

How can that be? He immediately his typed a question into the chat room and the first response he received floored him.

“Yes, as long as you are an American, you have to file U.S. taxes no matter where you live.”

Jamie did not see that coming. In fact, most Americans living stateside probably don’t give any thought to the U.S. tax system in general. Tax filing is something you do – something they have always done. It was something that Jamie had always done, too, but now he was worried. If he has to pay taxes in both Japan and America, he wondered if maybe the promotion wasn’t going to be worth as much as he first thought.

The good news is that while taxes need to be paid in both countries, Americans are not subject to double taxation. This is because the U.S. government offers expats numerous credits and exclusions designed to minimize U.S. tax that expat can claim when they file.

In fact, many expats do not pay any U.S. taxes at all, ao long as they file their U.S. tax return.

The U.S. government taxes its citizens globally because wants to ensure it receives its fair share of taxes for the services and protections expats enjoy as an American citizen.

Requiring expats to file – and possibly pay – taxes also eliminates the concern that expats will find financial loopholes that allow them to accumulate wealth from the United States without paying taxes. This was an issue as far back as the mid-1800s, when lawmakers first debated residency-based vs. citizenship-based taxes. At the time, the government agreed that American living abroad shouldn’t benefit from earning income off U.S. investments if they don’t pay taxes.

Some expats don’t file taxes, but experts say that is a mistake. There are numerous ways that Uncle Sam can find out, including through access to foreign tax information due to intergovernmental information sharing agreements, and directly from foreign banks and investment firms due to the FATCA (Foreign Account Tax Compliance Act) law. Expats taxes are complex, and expats should seek professional advice.


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