What Do Americans Do About Taxes When They Live Abroad?

As the author of A Better Life for Half the Price, one of the questions I get from potential expats is, “What do I do about taxes after I move to another country?”

expatriates filing taxes from another country

Well, Americans abroad have to file U.S. taxes on their worldwide income no matter what. Just because you’re out of sight doesn’t mean you get a pass. Uncle Sam is like Santa Claus, but real. He will find out if you’ve been naughty and didn’t file. And yes, you have to report that AirBnB income you’re earning from renting out your condo while you’re away as well.

If you’re an American, paying taxes is only simple if you don’t make much money and you don’t have any deductions to itemize. For everyone else, the U.S. taxation system is a complicated monster, driven more by political point-scoring and the influence of lobbyists than it is by any rational measure. It just got worse for this year if you’re not a big corporation or rich Republican campaign donor, so it’s more important than ever to know the rules and how they apply.

Or just pay someone else to know the rules and tell you what to do. That’s the approach I’ve taken whether I’ve lived in the USA or when I lived in Turkey, Korea, or Mexico. A good accountant will easily pay back a return if you can itemize, sometimes saving your thousands of dollars you would have missed otherwise—without doing anything shady.

Getting Tax Advice When Living Abroad

Finding tax filing help and advice locally is not an easy thing though. You can’t expect someone in Oaxaca or Chiang Mai to understand the U.S. tax system. You’ll probably need a virtual solution that links you to an accounting firm who specializes in working with expatriates.

One of those companies is the appropriately named Taxes for Expats. They’ve been around for 25 years, exclusively serving Americans living abroad in other countries. Since this is all they do, their system is set up to run online, with good security systems in place.

taxes for expats uploaded documents

You get expert human help to answer your questions, available by e-mail, chat, or phone 18 hours a day. They’re not outsourcing the work to some low-cost accounting sweatshop either. You will deal with a real employee.

When it comes time to pay my accountant, I’m never quite sure what the bill is going to be. With this company, the pricing is refreshingly concise and transparent. You pay up front knowing exactly what it’s going to cost to file through them, with no surprises. In case you were wondering, what they’re charging is lower than what my long-time accountant bills me for. So I’m looking at switching after I move back to Mexico later this year.

The Expat Tax Filing Process

Their system is built for the internet age, so it’s not like a clunky banking system stuck in the 1990s. Taxes for Expats uses their own encrypted data storage system where you have access to your files in the “My Documents” section and you can always see the progress of your filing.

taxes for expats process

You start out with a free consultation (a $50 fee is applied to your filing cost) and much of the work is questionnaire based. You fill in your vitals, there’s an “If this than that” set of equations behind the scenes, and then you know costs and documents required. No frantic back-and-forth emails at the last minute because something you didn’t know about is required.

Naturally you want someone really trustworthy to handle such a sensitive operation around your business or income. This company has great reviews no matter where you look: BBB, Facebook, LinkedIn, TrustPilot, etc.

Taxes for Expats will handle all the functions your normal family accountant would at home, including interpreting IRS letters or representing you in a dispute. Assuming your needs are in line with what most filers require though, it’s easy to figure out how much you’ll pay:

prices for expat tax services

There are a lot of funky rules for Americans living abroad, like the foreign earned income exclusion and the need to report foreign bank assets. You probably have better things to do than sort all these out on your own. If you use a company like Expat Tax Services, you can free up your time for running your business or just having more fun. They’re not the only company out there–I interviewed one of their competitors in my cheap living abroad book because the founder lives in Bali—but I like these guys because they’re very up-front about what you should ask when comparing tax filing services like theirs.

Comments
  1. Dorothy

    I’d like to see a post about filing one’s returns oneself. I’ve always done my own tax work and, if I do move out of the US, I want to continue to do so. I’m even considering learning to do tax preparation for other expats.

    • Tim Leffel

      Last time I did it myself as a test, after way too much looking up answers, my accountant sent his work back and I paid $1,100 less after deducting his fee. Never doing my own again.

  2. Dean

    Inspire us Tim, just how much did you earn that you have to have a fancy accountant etc.?

    • Tim Leffel

      Why is an accountant “fancy”? I run a reasonably successful publishing business, so I gross a solid amount. What’s left in my pocket net is a different story, thus the necessity of a good accountant.

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