How To File Taxes While Abroad: Taxes For American Expats

It’s tax season… or is it? Fun fact, in Korea, if you’re working for a company, your taxes will be filed in December. However, if you’re a freelancer like me, they won’t be filed by you until May. Oh, and you have to make sure you do your American taxes somewhere in there too!

Yes, you MUST file your American taxes every year. A lot of Americans move to Korea and seem surprised to learn they must file taxes every year. The US is one of just two countries that enforces citizen-based taxation.

Since you’re abroad, you actually get an extension on filing, but you absolutely still need to file your American taxes while living abroad.

How To File Taxes While Abroad: Taxes For American Expats

Here is some helpful information to get you on the right track to doing your expat taxes and getting the exclusions and credits, too!

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Questions You Might Have About Filing American Taxes

Do I need to file American taxes while living abroad?

YES! That’s the short and maybe not so sweet but more of a sour answer. The lengthier answer might appease your fears of being double taxed though. Basically, you should file your taxes every year, but that doesn’t mean you’re paying in Korea AND in the US. You’ll most likely be tax exempt on the US side but you still need to file the paperwork.

According to the IRS, If you are a U.S. citizen or resident alien living or traveling outside the United States, you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.

What happens if I don’t file American taxes while living abroad?

The IRS site explains, just like every US resident, if you’re living abroad and fail to file your US or state taxes, you can receive a penalty for not filing taxes, even if you do not owe taxes. The failure to file penalty could be thousands of dollars, being disqualified from benefits that will reduce your tax obligation, or worse.

Do I need to file my taxes by April 15 while living abroad?

No. Because we are abroad, we get an extension to file automatically. American citizens living abroad should file their taxes by June 15th. This is great if you’re a freelancer in Korea like me and don’t even get your tax information back from the Korean government until May anyway.

Will I have to pay double taxes? Taxes in Korea and taxes in the US?

The simple answer is no… unless you’re making cash hand over foot here. If you’re paying taxes in Korea, you’ll need to file additional paperwork with your American taxes in order to NOT get doubly taxed. Here’s what you can do:

You can exclude your foreign earned income.
You can use the foreign earned income tax as a tax credit toward your US taxes owed.

You can exclude your foreign earned income, however, if you made many in the US, say from that website or YouTube channel you also are workin’ it on, they you may still owe, but it just won’t include the income from here that you’ve already been taxed on.

What’s the difference between excluding foreign earned income and taking the foreign earned income credit?

There are pros and cons to each so it’s important you know your own situation and what your goals are. Here’s what to know.

The Foreign Earned Income Exclusion is good, if:

you pay low/no income tax in your host country.
you have no/minimal income in the US. Basically, lower than the standard deduction.
you don’t plan on having kids that will register for a US Social Security number.

The Foreign Earned Income Exclusions is NOT good, if:

you contribute to a US retirement account, or IRA.
you want to claim your refundable tax credits.

The Foreign Earned Income Tax Credit is good, if:

you pay more income tax in your host country than you would in the US.
you have investments or other ‘unearned’ income that can’t be excluded on Form 2555.
you earn more than the foreign earned maximum exclusion (note that the amount can change so you need to check it each year).

How Can I File My Taxes While Abroad?

I’ve done everything from filing myself, using a CPA, and using an online service. As with everything, there are pros and cons to each options and a lot of it comes down to whether you have income just abroad, or at home, as well as how big or small your family is.

FREE Filing Options: The IRS actually has some FREE file options. As I mentioned, this is only possible under certain situations but you can see if you would qualify and it suits your needs at that link above.

If you’re doing your own taxes, you should mail your documents to:

Department of the Treasury
Internal Revenue Service
Austin, TX 73301-0215
United States of America

Note: You don’t need to send your check along with your documents if you owe. You can make a payment to the IRS here.

Tax Experts For Expats: There are companies that can handle all of the confusing dirty work that American taxes entail. Living in Korea has really made me lazy when it comes to taxes because in Korea it is SO easy. I literally don’t have to do a thing except show up and sign a paper. Anyway though, American taxes can be confusing and there are some great companies that can help. Here are a couple to check out:

H&R Block Expat Tax Preparation: I used H&R Block many years back when I was in the States. Note that they have a separate branch for expats which I’ve linked above.
TieTax: I started using TieTax when I had some issues and needed a CPA to file some amendments for me. I ended up using them a couple more times for general taxes too. Ask for Stephen Boush. He’s my go-to guy.
Taxes For Expats: I haven’t used this company yet but they are the top rated US Expat Tax firm on Trustpilot.

Late to do taxes? Forgot to do them last year? Here’s What To Do

If you haven’t been doing your taxes or need some help, tax preparers have a number of services. They can help you with:

back taxes
tax planning
taking care of delinquent taxes
helping you file amendments

These are exactly the kinds of things that the expat tax experts I listed above can help you with. Maybe you haven’t filed in a couple of years. Don’t keep putting it off because it’s too late now. Get in touch with a CPA and get your finances in check especially if you plan on moving back to the States anytime soon.

Don’t Forget The FBAR!

So you have figured out the taxes and are either doing them yourself or hiring someone. Great! Hold on though, because you also need to file an FBAR. FBAR stands for Foreign Bank Account Reports and all US citizens and green card holders who have $10,000 or more, in aggregate, in accounts outside of the US at any time during the tax year, must file an FBAR online or have someone file a FinCEN Form 114 as your behalf if you have a service doing it for you.

Probably when you opened a Korean account, the bank had you sign a form which said you understood and agreed to let the bank provide your account and balance information directly to the IRS. Don’t think you did? Oh yes you did.

Actually, when I came in 2006, they didn’t have me do this but a few years later something-or-other was passed and whenever I visited my bank again, they asked me to complete the form.

Since the 2008 financial crisis, and the resulting national deficit and debt, the government has been particularly keen to track down tax-dodgers with money hidden abroad. If you are working in Korea as a teacher you probably don’t have a huge amount and won’t be the tax dodger they’re on the lookout for, but it’s always good to follow the rules and be safe rather than sorry.

FBAR enforcement has increased so do NOT sidestep this part of filing. There may be harsh penalties enforced for non-compliance.

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