Living Abroad Does Not End U.S. Tax Obligations

According to CNBC, Americans who live overseas may still have to file U.S. tax returns and report worldwide income, even if they also owe taxes in the country where they live and work. Erin Collins, who leads the Taxpayer Advocate Service, said in her annual report to Congress that the challenges facing taxpayers abroad are among the most serious problems confronting American taxpayers, and she warned that failing to comply with U.S. tax and foreign information reporting rules can lead to large penalties. The article said the foreign earned income exclusion may allow eligible taxpayers to exclude up to $132,900 of foreign earned income from U.S. federal income taxes for the 2026 tax year, but the break is not automatic and generally requires filing a U.S. return. It also said Americans abroad may qualify for the foreign tax credit for income taxes paid to another country, though taxpayers cannot claim that credit if they use the foreign earned income exclusion. The piece noted that Americans with foreign financial accounts may also face reporting requirements, including an FBAR filing with the Financial Crimes Enforcement Network if the combined value of those accounts exceeds $10,000 at any point during the calendar year. A single U.S. taxpayer living abroad must also generally file a separate IRS form to report specified foreign financial assets worth more than $200,000 on the last day of the tax year, or more than $300,000 at any time during the year.