Living abroad doesn’t cancel your US tax obligations. That part catches people off guard more often than you’d expect. You move to Berlin or Sydney, start paying local taxes, and somewhere along the way, it feels settled. Then tax season comes around, and suddenly the rules don’t quite line up the way you thought they would.
Most mistakes aren’t reckless. They’re usually small misunderstandings that snowball. A missed form here, a wrong assumption there. So, if you’re filing for the 2025 tax year in 2026, here are a few of the common ones worth watching.
Missing US Tax Deadlines
It sounds basic, but it happens a lot. People assume that because they live abroad, deadlines are either flexible or not really enforced. There is some truth to that, but only partially.
US expats do get an automatic extension to June 15, 2026. That helps. But the original deadline, April 15, still matters because that’s when interest on any unpaid tax begins. If you need more time, you can extend it further to October 15. Still, that doesn’t pause interest either.
A small distinction, but one that tends to cost money when overlooked.
Choosing the Wrong Tax Strategy (FEIE vs FTC)
Many expats default to the Foreign Earned Income Exclusion. It feels straightforward. For 2025, you can exclude up to $130,000 of earned income. Clean, simple, done.
If you’re living in a higher-tax country like France or Germany, the Foreign Tax Credit often works better. Instead of excluding income, you claim a credit for taxes already paid abroad. In many cases, that wipes out your US liability more efficiently.
There’s also a trade-off people don’t always notice. Using the exclusion reduces your “earned income” for other credits. That can quietly limit benefits you might otherwise qualify for.
You can technically use both strategies. Just not on the same income. And figuring out the right mix takes a bit more thought than most people expect.
Not Reporting Foreign Bank Accounts
Here’s where things start to feel a little excessive, at least from a practical standpoint.
Even if you owe zero tax, you may still need to report your foreign accounts. If the total balance across all accounts exceeds $10,000 at any point during the year, you’re required to file an FBAR (FinCEN Form 114). Not per account. Combined.
So, imagine you’ve got a checking account, a savings account, maybe a local investment account. None of them seems significant individually. Together, though, they cross the threshold.
And yes, the penalties for missing this can be surprisingly high, even when the mistake wasn’t intentional.
There’s also Form 8938 under FATCA, which overlaps but doesn’t always apply in the same way. It’s one of those areas where the rules feel duplicative, and honestly, they kind of are.
Assuming Foreign Income Isn’t Taxable
This one comes from a reasonable assumption. You’re earning money abroad, paying tax abroad, so why would the US be involved?
But the US taxes based on citizenship, not residency. That means your worldwide income still needs to be reported. Salary, freelance work, rental income, dividends. All of it.
Now, to be fair, that doesn’t mean you’ll be taxed twice. Tools like the FEIE or the Foreign Tax Credit exist for that exact reason. Still, reporting comes first. Relief comes after.
Skipping the reporting step altogether is where problems tend to start.
Overlooking Self-Employment Tax
If you’re freelancing or running a business abroad, this one can sting a bit. Even if you exclude your income using the FEIE, self-employment tax doesn’t go away. That’s the 15.3% covering Social Security and Medicare.
Some expats assume everything is covered once their income is excluded. It’s not.
There are exceptions. If you live in a country with a totalization agreement, you might be able to avoid paying into both systems. But that depends on your setup, and it’s not automatic.
So, if you’re invoicing clients from a laptop in Lisbon or Bangkok, it’s worth double-checking where those obligations actually land.
Not Catching Up on Missed Filings
Someone realizes they haven’t filed in a few years, and instead of fixing it, they wait. Mostly because they assume penalties will be severe.
In reality, the IRS offers the Streamlined Filing Compliance Procedures for non-willful cases. If you genuinely didn’t know you had to file, there’s a path to catch up, often with reduced or no penalties.
It’s not painless, but it’s far better than letting the situation sit unresolved. And, in most cases, the longer you wait, the more complicated it becomes.
Not Filing the Right Forms
Sometimes people do file. They submit a return, report their income, and think they’re done. But expat taxes aren’t just about the main form.
Depending on your situation, you may need Form 2555 for the FEIE, Form 1116 for the Foreign Tax Credit, Schedule B for foreign accounts, or Form 8938 for additional reporting.
Missing one doesn’t always cause immediate issues. But it can trigger notices later, which is rarely a pleasant surprise.
It’s less about doing something wrong and more about not realizing what’s required in the first place.
Avoid Costly Mistakes with the Right Support
Most of these mistakes come down to one thing. Not carelessness, just incomplete information. The rules are layered. Sometimes inconsistent. And occasionally a bit counterintuitive.
If you’re unsure whether you’ve handled things correctly, it might be worth taking a step back before filing. A second look can catch small issues before they turn into bigger ones.
That’s where Expat US Tax comes in. The goal isn’t just to file a return, but to help you understand what’s happening behind it. And ideally, avoid having to fix the same mistake twice.
Disclosure: This post does not serve as legal or tax advice or a substitute for professional tax consultation. The information provided is for general educational purposes only. Tax laws and regulations are subject to change and may vary depending on your individual circumstances. Always consult a qualified tax professional before making any decisions related to your tax situation.