Access Leading Tax Experts And Technology
In Our Global Digital Marketplace

Please enter your input in search field.

Foreign Earned Income Exclusion for US Expats

Even if you’ve moved abroad for a brighter future, you still might have obligations towards the IRS. What happens if you earn income from sources outside the United States? If you live abroad, you might qualify for the foreign earned income exclusion (FEIE). This article explains what FEIE is and how it works, and provides some examples of situations where you might benefit from claiming it.

The U.S. retains its right to tax citizens and Green Card holders who live abroad and they must file their taxes even if they’re not physically present in the country. The foreign earned income exclusion (FEIE) allows U.S. taxpayers to exclude from their taxable income certain amounts they earn outside the United States. The FEIE was created in 1954 to relive American Citizens from the burden of double taxation when they move overseas.


The Foreign Earned Income Exclusion is an IRS exclusion that American expats can use to reduce their taxable income (or in some cases completely eliminate) i.e. their U.S. tax owing. It is the most common and the most widely used tool to reduce US expat tax owing that the IRS offers.

You don’t automatically receive the benefit of FEIE by just living abroad — you must meet specific qualifications which we will discuss later and submit the Form 2555.


U.S. citizens and resident aliens who meet certain requirements to exclude up to $120,000 of foreign-earned income in 2023 (The FEIE is adjusted every year for inflation). If used correctly, the FEIE can help you save thousands of dollars on your US taxes.

The maximum exclusion for 2024 is $126,500. If you’re filing under the married filing jointly status and your spouse also meets the FEIE requirements, you can exclude up to $253,000 of your foreign income in 2024.


Read More

The Substantial Presence Test: How To Calculate It With Examples

Navigating the complex landscape of U.S. tax regulations can be a daunting task, especially for individuals who split their time between the United States and other countries. One crucial concept that frequently comes into play is the Substantial Presence Test (SPT). This test is a critical determinant used by the Internal Revenue Service (IRS) to assess tax liability for individuals who are not U.S. citizens or green card holders but spend significant time in the U.S.

This article aims to provide a clear and detailed guide on the Substantial Presence Test, elucidating its criteria, implications, and how it applies to non-resident aliens. Our goal is to offer valuable insights that aid in achieving compliance with U.S. tax obligations, ensuring a thorough understanding of your tax residency status.


The Substantial Presence Test is a criterion set by the United States Internal Revenue Service (IRS) to determine an individual’s tax residency status in the U.S. It applies to non-U.S. citizens and assesses whether they have spent a sufficient amount of time in the United States to be treated as a resident for tax purposes. This test is pivotal as it affects how and to what extent individuals are subject to U.S. income taxes.

The test calculates this by counting the total days of physical presence in the U.S. over a 3-year period. If the sum equals or exceeds 183 days, the individual is considered a U.S. resident for tax purposes for that year. This determination has significant implications for an individual’s tax liabilities, as it dictates whether they are subject to U.S. tax on their worldwide income.


Days of presence in the United States refer to the number of days an individual spends physically present in the country. This can include days spent for work, vacation, or any other purpose. For non-residents and foreigners, days of presence are often closely monitored to determine their tax liabilities and immigration status. For US citizens and residents, it can also impact their taxation and eligibility for certain benefits.


Read More

How Far Back Can The IRS Audit?

Navigating the labyrinthine world of U.S. taxes, including federal tax returns and individual tax returns, is challenging enough when you’re stateside. For U.S. expatriates, the complexity can multiply. One question that often looms large is, “How far back can the IRS audit?” Understanding the rules, statute of limitations, and exceptions surrounding IRS audits is crucial for maintaining compliance and peace of mind. Generally, the IRS has a three-year window to audit your tax returns, but as you’ll see, there are exceptions.

If you don’t file your tax returns, the statute of limitations never starts, allowing the IRS to audit the return at any time in the future. This is particularly important for U.S. expats who might assume they’re exempt from filing because they’re living abroad.

Related: Common Mistakes To Avoid When Claiming Foreign Earned Income Exclusion

What Is The Statue Of Limitations?

The term “statute of limitations” refers to the time frame within which the IRS is legally allowed to audit your tax returns for potential errors, omissions, or fraud. This period is generally three years from the date you filed your return or the due date of the return, whichever is later. After the statute of limitations expires, the IRS generally can’t question the information you’ve reported on your individual income tax return, or your filing history, or request additional documentation.

Taxpayers generally have three years from the date they filed their original tax return to claim a refund.

What Happens When You Don’t File Your Tax Returns?

Read More

There are a few deductions and exemptions available to a U.S. person who lives and works overseas. These will help you to lower your expat taxes and might even get you a refund.

If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. The most common deduction is the Foreign Earned Income Exclusion, which is calculated on Form 2555. If you qualify for this you may exclude up to $108,700 of your foreign earned income. To qualify, you will need to meet either the Physical Present Test or Bona Fide Resident Test for living outside of the U.S.

Foreign Housing Exclusion or Deduction is another option that can save you some money on your taxable income. You need to be either a salaried employee, a wage earner or a self-employed individual to qualify for this deduction. It’s in an addition to FEIE and increases the exempted income by the amount of your qualified housing expenses. Depending on the country of your residence, the allowable deductions for the foreign housing will vary and are subject to limitations.

Tax credits allow you to lower the tax due after your taxable income has been fully calculated. Your tax credit may include what you have already paid to your resident country. Foreign Tax Credit is useful for any expat who has paid taxes overseas. This option does not require a person to prove their residence in an overseas location. If a U.S. citizen works overseas or is involved in foreign investments, it is likely that they have paid taxes to a foreign government. If the tax rate of the foreign country is equal to, or greater than, the U.S. tax rate, the Foreign Tax Credit will successfully rid the expat of any U.S. tax obligation on that amount.

Use Form 1116 “Foreign Tax Credit” to figure out the amount of foreign tax paid and calculate the credit. To qualify for this credit, you will need to meet the following requirements:

Read More

Introduction To Citizenship Based Taxation

You will also learn alot from this YouTube Video:

Part A: Introduction – About Citizenship-based Taxation
Part B: How the Internal Revenue Code is designed to mitigate the effects of double taxation in certain circumstances
Part C: Determining what is “foreign source” income
Part D: The problem of international waters …
Part E: The effect of sourcing to the US income earned in international waters by dual tax residents
Part F: Deducting “foreign taxes” paid – although income from international waters may not be foreign, it is still subject to the payment of “foreign taxes”
Part G: Can a US citizen living abroad be saved by a tax treaty? Maybe if he/she lives in Canada****
Part H: Conclusion and the need for “Pure Residence-Based Taxation”

Part A: Introduction – About Citizenship-based Taxation

Whether they live in Mexico, France, Canada, Brazil or even on a yacht, US citizens are taxable on their worldwide income. Worldwide income means income of all kinds, from all sources and wherever earned. US citizens are taxable an ALL income sources. It doesn’t matter whether the income has a source in Mexico, France, Canada, Brazil or even on a yacht. For example, a US citizen living in France who has ONLY French source income is required to treat that income as taxable in the United States. The fact that the income is also taxable in France is irrelevant!

The Internal Revenue Code is based on a presumption of double taxation. The presumption of “double taxation” is reinforced by the “saving clause” in US tax treaties where the treaty partner country agrees that the US retains the right to tax US citizens regardless of the tax treaty. The treaties themselves typically contain a small number of specified exceptions that mitigate against the effects of double taxation in certain narrow circumstances.

Relief from double taxation is available either domestically under the Internal Revenue Code or through provisions in international tax treaties (or possibly both). Each avenue of mitigation will be considered separately.

Read More

A Guide To Recovery Rebate Credit For U.S. Expats: You May Still Be Able To Claim This Credit

If you’re one of the many U.S. expats who are owed stimulus money, you can still claim it through Recovery Rebate Credit. As the matter of fact, 2024 is the last year to get all the stimulus checks you might have missed! It will either boost the amount of your tax refund or reduce the taxes you owe to the IRS. Either way – you win! Don’t miss out on the opportunity to get the money you’re entitled to. Keep reading to find out how the credit works and what makes you eligible to qualify.

WHAT IS RECOVERY REBATE CREDIT?Recovery Rebate Credit is part of the Covid-19 Economic Relief program. The credit makes it possible for those who didn’t receive Economic Impact Payments (also known as stimulus payments) to claim their missing money. So if you were eligible for stimulus payments but did not receive them (or you received a partial payment), you can claim them through Recovery Rebate Credit on your tax return.


Getting your Recovery Rebate Credit is not too complicated. You just need to file the right tax return and you’re good to go. For stimulus payments made in 2020 that you haven’t already received, you can claim the Recovery Rebate Credit on your 2020 tax return. And for payments made in 2021, you will need to file a 2021 tax return.

Even If you don’t usually file taxes but are otherwise eligible for stimulus checks, you will still need to file in order to get your money. And keep in mind – 2024 is the last year to do it! If you need any help along the way, don’t hesitate to reach out to us.


To put it simply – stimulus payments were actually just advanced payments of the tax credit. The U.S. government provided them in response to COVID-19, aiming to get money into the hands of taxpayers as fast as possible, without having to wait for them to file their tax returns.

In total, three rounds of stimulus checks have been paid out. The amounts you were eligible to receive varied depending on your filing status and other factors.


The first and the second stimulus checks were advance payments of the 2020 Recovery Rebate Credit claimed on a 2020 federal tax return. They were sent out in 2020 and early 2021. Here’s how much the first 2 rounds of Stimulus Checks are worth:

  • The first stimulus payment provided up to $1,200 per eligible individual, while a married couple filing a joint return received up to $2,400. An additional $500 was provided per dependent child.
  • The second stimulus payment provided up to $600 for eligible single individuals, and up to $1,200 for married taxpayers filing a joint tax return. An additional $600 was provided per each dependent child.

The third round of stimulus checks (including the plus-up payments) was an advance payment of the 2021 Recovery Rebate Credit claimed on a 2021 tax return. These checks were issued starting in March 2021 and continued through December 2021.

  • The third stimulus check of up to $1,400 was made available per eligible individual. A married couple filing a joint return could get up to $2,800. An additional $1,400 was provided for a dependent of any age.

The eligibility rules for the recovery rebate credit are basically the same as they were for the Economic Impact Payments (stimulus checks).

The only major difference is that eligibility for the stimulus check was typically based on the information that the government had at the time of distributing the payments. On the other hand, eligibility for the credit is based on the IRS’s most recent information for you on file.

You’re generally eligible to claim the Recovery Rebate Credit if you meet the following requirements:

  • You are a U.S. citizen, Green Card Holder, or qualifying resident alien.
  • You are not a dependent of another taxpayer
  • You have a valid Social Security number (SSN)
  • You did not receive the entire credit through previously issued stimulus payments (this means you received a partial payment or missed an entire check)

If you’re claiming additional stimulus money based on your dependent children, they also need to have a valid SSN or adoption taxpayer identification number (ATIN).

Nonresident alien individuals, estates, and trusts don’t qualify for the credit. On the other hand, eligible U.S. expats who are thinking about renouncing their U.S. citizenship will be able to claim the credit. If you’re one of them, don’t let the cost of renunciation discourage you. Your Rebate credit will more than likely cover any fees and expenses you might have.

After meeting the qualification requirements above, the individual’s adjusted gross income (AGI) must fall within certain income limits to receive the full credit. Find more information on income requirements in the section below.


As with the stimulus checks, calculating the amount of your recovery rebate credit starts with a “base” amount. If you’re eligible for the full credit, the base amount you may receive is up to $3,200 for single filers or $6,200 for married couples filing a joint return. You can claim even more money in case you have children or adult dependents.

The actual amount of your Recovery Rebate Tax Credit is based on the following:

  • Filing status – as we already mentioned, the base amount you are eligible to receive differs depending on your filing status (Single Filer or Married Filing Jointly)
  • Number of qualifying children or adult dependents – you are eligible to receive a certain amount of money per each child (or an adult-dependent in case of a third stimulus check)
  • Adjusted gross income – After adding up the base amount and any additional amount for your dependents, you then need to determine if your recovery rebate credit is reduced because of your income. If your income is less than $75,000 (for Single Filers), $112,500 (for Head of Household filers), or $150,000 (for Married Couples Filing a Joint Return), you can get the full benefit. The credit starts to decrease for people with higher earnings that exceed these income thresholds.
  • Amounts of Stimulus Payments you previously received – Finally, you need to subtract the total amount of stimulus checks and “plus-up” payments you received in the past.

If you have already received the full amount of stimulus payments that you’re eligible for, you don’t qualify for any additional credit. However, if you ended up receiving more than you qualified for, you are not required to pay it back.


What if you forgot the exact amount of money you received through stimulus checks? There are several ways to find out your payment status:

  1. The amount received from the first stimulus check can be found on IRS Notice 1444, the second stimulus check on Notice 1444-B, and the third on Notice 1444-C, which were all sent out by the IRS. Through March 2022, they also sent out Letter 6475 which confirmed the total amount of the third stimulus check and any received “plus-up” payments.
  2. To find the amount to subtract from the credit, you can also check your IRS online account (if you have one). The exact amount of stimulus payments you previously received is listed under the Tax Records tab – “Economic Impact Payment Information.”
  3. You can also locate the amount of your first, second, and third stimulus payments by checking your bank statements, in case you had them direct deposited. These payments should be labeled “IRS TREAS 310” with codes “TAXEIP1” (1st payment), “TAXEIP2” (2nd stimulus payment), or “TAXEIP3” (3rd stimulus payment).
  4. Finally, you can request a tax account transcript from the IRS. All transcript types are available online through the IRS’s Get Transcript service. To have your transcript mailed to you – submit a Form 4506-T or make a request using the IRS’ automated phone transcript service at 800-908-9946.

If the above options don’t work for you, you can provide the amount of your stimulus checks based on your memory. If you misremember the exact amount and make a mistake, the IRS will correct the error for you. In case this happens, they will send you a notice of any changes made to your return.
But should you do it? Keep reading to find out.


You will most likely get Recovery Rebate Credit as part of your tax refunds. But how long will it take to get your money? Depending on the filing options you chose and the accuracy of the information, it usually takes between 3 to 8 weeks to receive your refund.

Making a mistake will not result in financial loss, but might require extra time to fix. Any errors on your federal tax return, including those related to calculating the recovery rebate credit can cause delays and prolong the wait for your refund. So if all the information on your tax return is correct, it might take just a couple of weeks. But If there are errors or red flags, it can go on for months.

You can receive your payment faster through direct deposit rather than waiting for it to arrive in the mail. Depending on your preferences, your refund can be deposited into your bank account, prepaid debit card, or mobile app.


Since many individual taxpayer situations change from year to year, some people who were not eligible in the past may become eligible in 2023. Here are some situations when this might happen:

  • Some people may have received less than the full Stimulus Payment because their adjusted gross incomes were too high. A change in income could make a filer eligible for more credit.
  • Eligible taxpayers can get additional stimulus money if their family expanded in the meantime through the birth or adoption of a child.
  • Eligible people who did not have a valid Social Security Number but acquired Social Security Number in the meantime may now be able to qualify.
  • Individuals who were claimed as dependents in the past (and were, therefore, ineligible) may qualify for the credit if they are no longer dependents. This also includes some first-time filers, like college students for example. Many college students are first-time filers, as they are no longer claimed as their parents’ dependents. They can also claim the credit if they meet the eligibility requirements.
  • How do I claim Recovery Rebate Credit on my tax return? You need to file a tax return for the year in which the credit applies, and include information on the stimulus payments received. You can report the total amount of the Recovery Rebate Credit that you are claiming using Form 1040 or 1040-SR (enter the amount of your credit on line 30).
  • How to Claim the 2021 Recovery Rebate Credit? Following the instructions above, file a 2021 federal tax return and include the information on any stimulus payments you already received.
  • How to Claim the 2020 Recovery Rebate Credit? Simply file your 2020 federal tax return and include all the relevant information on the stimulus payments you received in the past.
  • What if my stimulus check was lost? If you suspect that your check was lost, stolen, or destroyed – don’t file for the Recovery Rebate Credit but instead ask the IRS to trace the payment. If the check was not cashed, the IRS will reverse your payment and notify you. On the other hand, if the check was cashed, the Treasury Department’s Bureau of the Fiscal Service will send you a claim package that includes a copy of the cashed check.
Olivier Wagner

A tax preparer who is both an Enrolled Agent and a CPA (New Hampshire) very well aware of the tax situation of US citizens living abroad. He runs the tax practice 1040Abroad.

US Expat Tax News For 2024

As the year 2024 approaches, individuals and businesses need to be aware of the upcoming tax changes that will impact their financial planning. From adjustments in tax rates to updates in deductions and credits, understanding these changes can help taxpayers prepare and make informed decisions.

In this overview, we will discuss the key tax changes that will take effect in 2024, providing insights into how these revisions may affect your tax liability and overall financial situation. Stay informed and stay ahead of the game by keeping up with the latest developments in tax laws and regulations.

  • Tax Deadlines: The standard filing deadline for US residents is April 15, 2024, but expats get an automatic extension to June 17, 2024. 
  • FBAR and FATCA Reporting: International taxpayers with foreign accounts get an automatic extension to October 15, 2024, to file their FBARs. FATCA reporting is tied to your individual tax return deadline.
  • Foreign Earned Income Exclusion: The FEIE for 2024 is increased to $126,500, aiding American citizens in managing their worldwide income more effectively.
  • Standard Deduction Increases: The standard deduction for various filing statuses has increased for 2024, impacting both passive and unearned income reporting.
  • Stimulus Checks and Compliance: US expats who haven’t claimed their stimulus payments for tax years 2020-2022 can still do so. Additionally, those who are behind on their tax filings can use the IRS amnesty program to become compliant without facing penalties.

Read More

2024 Federal Tax Income Brackets: How To Claim $3200 With The IRS Streamlined Foreign Offshore Procedure

How to claim 3,200 USD with the IRS Streamlined Foreign Offshore procedure

If you are a U.S. citizen and haven’t filed your 2020 and 2021 tax returns yet, please do so.

June 15 2024 is the deadline to claim a refund for your covid 19 stimulus checks using the IRS Streamlined Foreign Offshore or tax amnesty.

This gives you four undeniable benefits:

Your non-compliance, which would otherwise lead to penalties, can be regularized under more friendly terms.

You can claim a stimulus check for a minimum amount of $3,200 on your 2020 and 2021 tax returns, provided that your annual income was less than $75,000 during those years.

It’s very beneficial: the value of stimulus checks exceeds the cost of the IRS Streamlined Foreign Offshore procedure.

We offer free consultations if needed: Book it now. Complimentary Consultation.Olivier Wagner, 1040 Abroad.

FBAR Penalties: Everything You Need To Know

If you’re required to file an FBAR (Foreign Bank and Financial Accounts Report) and fail to do so in a timely and accurate manner, you may face significant consequences, including civil monetary penalties, criminal penalties, or both.

For U.S. persons who discover they should have filed an FBAR in previous years, it’s important to take immediate action. The recommended course of action is to electronically file the overdue FBAR using the BSA E-Filing System. This article will delve deeper into the types of penalties associated with FBAR non-compliance, how these penalties are assessed, and the steps to become compliant.


The FBAR is a critical reporting requirement for U.S. persons holding foreign bank accounts. This requirement is triggered when the total value of an individual’s foreign financial assets exceeds the reporting threshold of $10,000 at any time during the calendar year. It’s crucial to understand that these assets include not just bank accounts, but also other financial assets held overseas. Failing to meet these filing obligations can lead to significant penalties, as detailed in the sections below.


The civil monetary penalties for failing to comply with FBAR requirements come with various upper limits, but there is no set minimum. These limits are subject to annual adjustments for inflation, as mandated by the Federal Civil Penalties Inflation Adjustment Act of 1990 and its subsequent amendment, the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. For penalties assessed after August 1, 2016, linked to violations that occurred post-November 2, 2015, the adjusted maximum penalty amounts are outlined in Title 31 of the Code of Federal Regulations (CFR), section 1010.821, under the Penalty Adjustment Table. This section details the inflation-adjusted civil penalties that can be imposed for failing to meet the FBAR reporting and recordkeeping obligations.


Read More

The Complete Guide For Submitting Form 14653 For The Streamlined Program

As a U.S. expat, understanding your tax obligations is essential. Form 14653 plays a key role for those considering the IRS Streamlined Foreign Offshore Procedures. In this guide, we’ll simplify Form 14653, ensuring you can confidently navigate the Streamlined Program to address your tax compliance issues. Dive in to learn more and achieve seamless tax compliance.

At 1040 Abroad, we value transparency in our pricing. That’s why our Streamlined Compliance Package includes the certification statement (Form 14653) at no extra cost. With our flat fee policy, you’re assured of no hidden charges or additional costs for any extra forms required. Our goal is to provide comprehensive, worry-free support as you navigate your tax obligations

What Is IRS Form 14653?

IRS Form 14653, also known as the “Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures,” is a form used by U.S. expats and Green Card Holders residing abroad to certify that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct.

This form is part of the Streamlined Foreign Offshore Procedures, which offer a way for U.S. expatriates to become compliant with their U.S. tax obligations if they haven’t been willfully avoiding these responsibilities without risking any penalties.

What Is “Non-Willfull” Conduct?

Read More

Navigating International Remote Work: Tax Implications for Employers


Following covid 19 when remote work became commonplace, or the only way to work, the concept of remote work has allowed employees to work from virtually anywhere. While this flexibility can be a win-win for both employers and employees, it also introduces complex tax considerations, particularly when employees are working from international locations. In this blog post, we will delve into the tax implications for employers of letting their employees work remotely in international locations, addressing potential dangers and offering solutions to minimize tax liabilities.

Ultimately, much of the exposure can be limited by restricting employees’ movement to countries that have a tax treaty and a social security totalization agreement with the country of origin, and fall within the parameters of that tax treaty.

Company Registration / Sales Tax / Corporate Income Tax

Company registration: By having a presence in given country, the corporation might be required to register itself with the local authorities. As these vary widely country to country, I will not get into specifics.

Sales tax: When employees work in a foreign country, it can create a nexus for the employer, potentially triggering the duty to collect and remit sales tax on goods or services sold in that area.

Corporate income tax: Tax treaties would exempt the corporation from paying corporate income tax to the foreign country if it doesn’t have a permanent establishment in that country.

A dependent agent (such as an employee), when acting on behalf of an enterprise, can create a permanent establishment if they have the authority to conclude contracts or regularly habitually perform activities on behalf of the employer. However, merely having an employee working in a foreign country does not automatically trigger PE status.

Income Tax Withholdings In Foreign Countries

Read More

FBAR Compliance: From Requirements To Submission

Navigating the world of taxes as a U.S. citizen overseas? Then you’ve likely come across the term FBAR – the Foreign Bank Account Report. We recognize that for U.S. expats, tax compliance goes beyond ticking boxes on forms. It’s about truly grasping your obligations and rights in foreign lands. At 1040 Abroad, our mission is to offer crystal-clear insights that enable you to act confidently. Rest assured, we won’t use scare tactics. Instead, consider us your trusted companion on this journey to compliance.

What Is FBAR?

FBAR stands for Foreign Bank Account Report, a disclosure requirement mandated by the United States Treasury Department. It is officially known as FinCEN Form 114 and is separate from your income tax return. The FBAR is designed to provide the U.S. government with information about financial accounts held by U.S. persons in foreign countries.

Who Needs To File An FBAR?

If you’re a U.S. individual or entity—be it a citizen, resident, or any form of business organization like an LLC or trust—you’re obligated to file an FBAR. The criteria are straightforward:

1) You must have either financial interest or control (like signature authority) over one or more financial accounts situated outside the U.S.

2) The combined value of these accounts must have exceeded $10,000 at any point during the year you’re reporting. It doesn’t matter if the account generated taxable income; its foreign location alone makes it subject to FBAR.

Common Exceptions To The Rule

Read More

%d bloggers like this: