U.S. Tax Filing Requirements for Americans Living Abroad

If you are a U.S. citizen or were born to American parents, you are generally required to meet the same federal tax obligations as individuals residing in the United States, even if you live abroad. This includes filing income tax returns, estate tax returns, and gift tax returns, as well as paying estimated taxes when applicable.

Understanding Your Filing Requirements

Your obligation to file a federal income tax return depends on your income level, filing status, and age. In most cases, you must file a return if your gross income from worldwide sources meets or exceeds the threshold established for your filing status in the IRS filing requirements table.

What Counts as Gross Income?

Gross income includes all income received in the form of:

• Money
• Goods
• Property
• Services

Unless specifically exempt from tax.

It is important to note that when determining whether you must file a return, you must include income that may later be excluded, such as:

• Foreign earned income - Employment income (Wages, Salaries and taxable benefit received through payroll)
• Foreign housing exclusions or deductions

If you are self-employed, your gross income includes the amount reported on the Gross Income line of Schedule C.

Additional Reporting Requirements for Foreign Assets

In addition to filing an annual income tax return, certain U.S. taxpayers with foreign financial interests may have additional reporting obligations.

Form 8938 – Specified Foreign Financial Assets

You may be required to file Form 8938, Statement of Specified Foreign Financial Assets, if you have an interest in foreign financial assets whose total value exceeds the applicable reporting threshold for your filing status and residency.

Forms 3520 and 3520-A – Foreign Trusts and Foreign Gifts

A UK Self-Invested Personal Pension (SIPP) is generally considered a foreign trust under U.S. tax law. However, the exact classification and reporting obligations depend on how the account is structured and your level of control over it.

You may also need to file:

• Form 3520 if you:
  • Made contributions to a foreign trust
  • Received distributions from a foreign trust
  • Received certain gifts from foreign individuals
• Form 3520-A if you are treated as the owner of a foreign trust.

FBAR – Foreign Bank Account Reporting

U.S. persons must file the FinCEN Report 114, commonly referred to as the FBAR (Report of Foreign Bank and Financial Accounts), if:

• You had a financial interest in, or signature or other authority over,
• One or more foreign bank, securities, or other financial accounts,
• And the aggregate value of all such accounts exceeded $10,000 at any time during the calendar year.

You are not required to file an FBAR if:

• The accounts are held at a U.S. military banking facility operated by a U.S. financial institution, or
• The combined value of all foreign accounts remained at or below $10,000 for the entire year.