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Employee abroad
If you earn salary or wages while living outside the United States, your filing path usually starts with who employs you, where you perform the work, and whether you pay income tax to another country.
U.S. citizens and many green card holders may still have U.S. filing obligations while living and working abroad.
The important questions are not only where your employer is located. You also need to understand where the work was performed, how the income was taxed, whether you qualify for an expat tax benefit, and whether foreign accounts create separate reporting requirements.
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Start with the situation that most closely matches how you work. More than one may apply if you changed employers, worked in several countries, or had multiple income sources during the year.
You are employed by a company, NGO, school, government organization, international organization, or other employer based outside the United States.
You remain employed by a U.S. company but perform some or all of your work while living in another country.
You changed jobs, worked for employers in different countries, or received wages from more than one employer during the tax year.
You work online for an employer while moving between countries or living outside the country where the employer is based.
Employment income earned while living abroad may still need to be reported on your U.S. tax return. The next step is understanding how foreign taxes, exclusions, credits, and account reporting fit together.
Foreign account reporting may also apply separately. Filing an income tax return does not automatically satisfy FBAR or Form 8938 requirements.
Employees abroad often need to understand how foreign income, foreign taxes, exclusions, credits, and foreign account reporting connect.
Understand when Americans abroad may still need to file a U.S. tax return.
Compare two common approaches used to address foreign income and double taxation.
Understand how the Foreign Earned Income Exclusion may apply.
Understand how qualifying foreign income taxes may create a foreign tax credit.
Review whether foreign bank or financial accounts create an FBAR requirement.
See how the employee filing pieces connect to the main U.S. individual tax return.
Some employees abroad use the Foreign Earned Income Exclusion through Form 2555. Others use the Foreign Tax Credit through Form 1116. The better starting point depends on your income, foreign taxes paid, country of residence, and prior filing history.
If you pay little or no foreign income tax, FEIE may be important to understand. If you pay substantial foreign income tax, the Foreign Tax Credit may deserve closer review.
Do not assume both benefits apply automatically to the same income. Compare the two approaches before choosing a filing path.
Many expats discover their U.S. filing obligations years after moving abroad because they assumed foreign residency or foreign taxes replaced their U.S. filing responsibilities.
Missing prior-year returns or foreign account filings is a different situation from preparing only a current-year return. Start by identifying what was missed before choosing a catch-up approach.
Employee filing can become more complicated when compensation, retirement, investments, multiple countries, or business activity are added.
Take extra care if you have:
In advanced situations, professional tax guidance may be appropriate before filing.
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Disclaimer: This guide is for general educational purposes only and is not legal, tax, or accounting advice. U.S. expat tax rules can change and individual facts matter. Review current IRS guidance or consult a qualified tax professional before filing.