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Expatriate Tax Preparation – The Basics

Get Large Firm Expatriate Tax Preparation Expertise With Small Firm Personal Attention

If you are a US taxpayer living abroad, you will want to hire a firm that specializes in expatriate tax preparation. Many Americans abroad attempt to do their own tax returns or continue to use their existing preparer that lacks extensive experience and knowledge with expatriate tax returns.

Unfortunately, this often results in a tax filing that is incomplete with missing forms and out of compliance potentially subjecting the taxpayer to risk of substantial penalties and a never-ending statute of limitations due to an incomplete return.

Expatriate Tax Preparation – Individual Tax Returns

Many professional tax preparers and online tax software packages will be aware of these forms albeit most do not have more than a rudimentary or basic knowledge and will not be able to provide much guidance or assistance for the taxpayer abroad beyond very basic situations.

  • Form 2555: If you qualify, you can use this form to figure your foreign earned income exclusion and your housing exclusion or deduction. You cannot exclude or deduct more than your foreign earned income for the year.
  • FBAR or FinCen Form 114: If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR).
  • Form 8938: This form is used to report your specified foreign financial assets if the total value of all the specified foreign financial assets in which you have an interest is more than the appropriate reporting threshold.


Complex Forms For Expatriate Tax Preparation

Most tax preparers do not support (nor have any familiarity with) and none of the online tax software options will support these common tax forms that apply to US expats.

If any of these forms apply to your expatriate tax preparation needs, you will want to make sure that your tax professional is qualified to support you in these areas as these forms are innately complex and require specialized training and knowledge.

For example, the IRS estimates that each Form 5471 will require more than 27 hours for preparation (not including recordkeeping); while each Form 8621 (i.e. for each individual foreign mutual fund held) requires 21 hours.

Instructions and published guidance from the IRS and other outside resources are very limited and incomplete and it is very common for the un-experienced to make significant errors and omissions which can delay your statute of limitations indefinitely until corrected.

  • Form 5471: If you run your own business in a foreign country and have established a foreign entity separate from yourself (not a sole proprietorship), then depending on your ownership interest (and resulting category or categories applicable) and the type of entity, you generally will have a Form 5471 filing requirement.
  • Form 8621 : If you have investments in foreign mutual funds, REITs, ETFs and the like, these investments typically will be classified as Passive Foreign Investment Companies (or PFIC) and subject to punitive tax rules and reporting that are extremely unfavorable.


Our goal at Tax Samaritan is to provide the best counsel, advocacy and personal service for our clients. We are not only tax preparation and representation experts, but strive to become valued business partners. Tax Samaritan is committed to understanding our client’s unique needs; every tax situation is different and requires a personal approach in providing realistic and effective solutions.
If you would like a quote, please click on the button below for a free, no obligation Tax Preparation quote and/or free 30-minute consultation to discuss your situation regarding your expatriate tax preparation further:

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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.

When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).

Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.

Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.



Updated: July 17, 2016

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