Filing taxes for US expat

Published 2021-05-06 10:11:59
US tax form 1040 with calculator and pen - Credit stockvault

Filing your annual tax returns comes around for every US expat as sure as the seasons change. However, the process may not be as straightforward as one would expect and this has resulted in many unforeseen issues for US expats with the Internal Revenue Service (IRS).

Atomik Research conducted a survey in January 2021, on behalf of H&R Block. They received a total of 503 responses from US expat living in countries like Japan, the UK and Mexico. It shows some surprising results.

Overall Results

  • An exceptionally high percentage (76%) of US expats working abroad said they had been audited by the IRS because their tax returns were filed incorrectly.
  • About 21% said they received no tax help from their employers while living and working overseas which created a barrier to filing their tax returns.
  • A large percentage of people (63%) experienced difficulty with filling in their tax returns while only about 15% described themselves as confident when doing their taxes as an expat.
  • About 75% of people who responded to the survey believed that earning a foreign income had a greater financial reward than working locally in the US.
  • Three quarters of all respondents also believe that they are better risk-takers than their friends and family who did not venture abroad to live.
  • Covid has also affected this cohort. Over a third of these US foreign workers thought about returning home to the US because their host country was badly affected by Covid-19.
76% said they had been audited by the IRS because their tax returns were filed incorrectly - Credit:

Lifestyles of US expats

  • Interestingly, about 27% of expats claimed earning enough to live a desired lifestyle in a foreign country came with unexpected complications.
  • 21% stated that one of those complications was understanding the procedure of filing tax returns.
  • Whereas about 26% believed they were safer from the pandemic in their host country than in the US.
  • About 38% of respondents stated they had a better quality of life in their host country.
  • 35% of people stated that they were in a better financial shape while living overseas.
  • Covid-19 was the reason about 62% of respondents were thinking of returning to the US and giving up on the expat dream.
  • Others still were prompted to increase their stints as expats. 82% of those who wanted to lengthen their time abroad expected to increase their time by a minimum of one year.
  • US expats, while living overseas, were still achieving life milestones like: 30% were home buyers, 25% were changing jobs or switching careers and 23% were getting married.

Finances of the US Expat

  • Three quarters of all respondents believe they will earn more money working overseas rather than in the US.
  • About 20% believed that the tax concessions they received while working abroad allowed them to save more money.
  • While 32% stated that affordable housing in their host countries facilitated better savings.
  • 29% claimed affordable healthcare in the host country helped them make bigger savings.
  • About 20% of respondents were affected by the pandemic by experiencing a wage reduction.
  • 17% of people had to dip into their retirement savings to supplement their income during the COVID-19 pandemic.
  • A large number of people (approximately 38%) had to find other jobs due to the economic changes experienced during the pandemic.
  • Surprisingly, 33% claimed the pandemic changes led to a pay increase.
  • More than 20% of respondents believed a tax planning financial product would be most helpful for US expats working overseas.
  • Over one in five people stated currency management was a more useful tool as a means to manage their wealth.
  • More than 20% claimed that a big financial barrier they’ve experienced while living and working overseas was the insufficient tax help from their employers.
63% experienced difficulty with filling in their tax returns - Credit:

Tax help for US Expats

  • A large percentage of people claim to have been audited by the IRS for filing their taxes incorrectly while working overseas.
  • Over a third of people had to pay fines greater than $500.
  • Almost two thirds of people believe that filing their tax returns as an expat is difficult, whereas only 15% described themselves as confident when filing their returns while working overseas.
  • A third of people claimed that in the time it took to complete their tax returns, they would rather be enjoying local culture or exploring the local sights.
  • More than one third of people said that more information on the tax requirements of foreign-earned income would help them file their taxes more easily while living abroad.
  • About 32% believed online help from a tax professional would help ease the process of filing their returns.
  • 40% of people said they needed more information on which documents they were required to include in their tax returns to make filing their US taxes smoother while living and working overseas.
  • Over a third of respondents wanted more information on rules that governed Foreign Earned Income Exclusion and how to qualify for it.
  • 27% said knowing where to send their tax returns would be helpful when living and working abroad.
  • Over 25% said easy communication with a tax professional who was based in the US, was important to them.
  • Just under a quarter of respondents cited experience with filing taxes for other US expats as important when they were looking for tax advice professionals overseas.
Only 15% described themselves as confident when filing their returns while working overseas - Credit:

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Author: KashGo
Expat Mum in the Desert and content writer for

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