Last-Minute Tax-Filing Mistakes Expats Often Make

With all the extra paperwork involved in filing a tax return as an expat, last-minute tax mistakes are a real fear. Whether it’s inaccurately reporting foreign income, overlooking foreign bank accounts reporting, or failing to utilize expat-friendly deductions and credits — these tax errors could cost expats a lot of time and money. In this guide, we’ll go over some of the most common last-minute tax filing mistakes expats make when filling out and submitting their annual tax returns, and discuss what you can do to avoid the same fate.

Failing to Report Foreign Income and Assets

As a US expat, you are still required to report your total worldwide income while living abroad — even if you did not earn a single cent on American soil. This includes things like your foreign salary, self-employment income, rental income, and foreign investments (just to name a few). Not only that, but the IRS also requires you to report your income in US dollars. This should be based on the exchange rate on the day you were paid, or by using the annual average exchange rate. These tax mistakes can add up. Failure to accurately report foreign income on time can lead to severe penalties, fines, and, in extreme cases, criminal prosecution.

FBAR

It is also essential that expats with foreign bank accounts are aware of the Foreign Bank Account Report, otherwise known as FBAR. This form must be filled out if the cumulative balance of the combined maximum balance of your foreign financial account totals $10,000 at any point in the year. This is true even if it’s only $1 over the monetary threshold. The FBAR is not filed with the IRS but rather with the Financial Crimes Enforcement Network (FinCEN) as Form 114. The FBAR deadline is April 15th. However, expats are given an automatic extension until October 15th if they miss the April deadline.

FATCA & Form 8938

For US taxpayers living abroad who have foreign assets exceeding $200k (or $400k when married and filing jointly), they fall under the Foreign Account Tax Compliance Act (FATCA) and must file Form 8938 (Statement of Specified Foreign Financial Assets) along with their annual tax return. These assets include things like pensions, investments, and life insurance with a cash value. Because Form 8938 is filed with the IRS as part of your tax return, you do not need to file for an extension separately. It is automatically included with your tax return extension.

Failing to Utilize Deductions and Credits

By not utilizing foreign tax treaties, deductions, and credits designed explicitly for US taxpayers living abroad, it could inflate your tax burden. You might not have owned anything at all, or worse, you could end up paying taxes on the same income in both the country where you reside as well as the United States. Fortunately, this is a common tax mistake that can be easily avoided.

Common Deductions and Credits

Here are a few of the best ways expats can lower their tax burden:

• A tax treaty is a bilateral agreement between two countries to resolve issues involving double taxation of passive and active income. This involves their respective citizens and residents. The United States has tax treaties with over 60 countries. However, the provisions of which differ from country to country. To claim a tax treaty benefit, expats must fill out Form 8833. Then, they should file it with their annual return.
• The Foreign Earned Income Exclusion (FEIE) is a tax deduction that allows expats to exclude up to $126,500 of foreign earned income from their US tax liability in 2025 for a 2024 return. While the FEIE reduces your tax bill, it has some limitations. Namely, you can only apply it to earned income such as wages and salaries.
• The Foreign Tax Credit (Form 1116) converts what has been paid in foreign taxes into a credit that can be used to lower your US tax liability. It does this by calculating the total taxes paid, converting the total to USD, and applying the dollar amount to your US tax liability. The FTC is typically more beneficial if you live in a high-tax country. This is especially true where foreign taxes outweigh US taxes, e.g., Germany and France.

It is possible to qualify for both the FEIE and the FTC, but not on the same income. For instance, if you earned $150,000 overseas, you can claim the FEIE on the first $126,500. Then, use the FTC for the remaining $23,500, assuming you have already paid income tax on this leftover income to a foreign government. In this case, the FTC will help reduce the amount of US taxes owed.

Wondering if you qualify for either of these expat tax credits? Try our free FTC / FEIE calculator to get a personalized recommendation.

Ignoring State Tax Obligations

One of the most common tax mistakes expats make involves filing a state tax return. Whether or not an expat has to file state taxes depends entirely on their last US state of residence and the tax rules therein. Some states define a tax resident as someone who maintains strong ties to the state. This includes holding a driver’s license or state ID, being a registered voter, owning property, and holding active bank accounts. It also includes having family connections to a spouse or dependents, among other things. Even if you don’t qualify as a resident, certain states require expats to pay taxes if they have any income from that state.

There are a handful of states which have relatively strict residency rules. Expats from these states must continue to file state returns each tax year unless they can demonstrate non-residency:

• California
• New Mexico
• New York
• South Carolina
• Virginia

Here are a few states that do not have state income tax obligations for expats living abroad:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas
• Washington
• Wyoming

There are only two states which tax residents solely on interest and dividend income:

• New Hampshire
• Tennessee

The IRS does not offer a comprehensive list of which states require returns from expats and which don’t, so it’s up to you to research your individual state’s laws to make sure. Don’t miss this step, as it’s a common tax mistake. Failure to file a state return could lead to a big headache down the road. When filing with MyExpatTaxes, our software automatically checks to see if you are required to fill out a state return. And if you do, it will be e-filed along with your federal return.

Get Help from MyExpatTaxes

Many of the forms we have outlined here today can be a little daunting. At first glance, it can be difficult to know which ones are mandatory and beneficial. Let MyExpatTaxes help you avoid common tax mistakes! Simply sign up for a free MyExpatTaxes account and answer a few questions. Based on your responses, our award-winning tax software will automatically identify and fill out any forms applicable to you. This ensures your annual return is in full compliance with the IRS. Start for free and pay only when you’re satisfied and ready to file.