Most Americans who move overseas carry the same quiet assumption with them.
I don’t live in the US anymore, so US taxes probably don’t apply.
It’s a reasonable thought. You’ve packed up your life, you’re paying tax somewhere else, and the US starts to feel… distant. Almost theoretical. And yet, this is usually where the confusion begins. Not because people are careless, but because no one ever explained the one rule that everything else hinges on.
That rule isn’t complicated. It’s just unexpected.
The first thing every American abroad must understand
The US taxes its citizens and Green Card holders on worldwide income, no matter where they live.
Not residency. Not physical presence. Citizenship.
That means if you’re an American living in London, Sydney, Dubai, or Toronto, the IRS still expects a tax return from you. Even if your employer is foreign. Even if your salary is paid into a non-US bank account. Even if you haven’t set foot on US soil in years.
Now, this is where nuance matters. This rule affects filing, not automatically paying. Those are two very different things, and the distinction gets lost more often than it should.
Still, this single concept explains why so many Americans abroad feel blindsided later on. They didn’t miss a detail. They missed the premise.
What “worldwide income” actually looks like in real life
Worldwide income sounds abstract until you put faces on it.
It’s the software developer in Berlin earning euros from a German company.
The consultant in Singapore invoicing clients as a sole trader.
The teacher in Japan with a local pension building quietly in the background.
All of that income counts on a US tax return.
And it’s not just income. Foreign bank accounts, even very ordinary ones, can trigger separate reporting requirements. A checking account for rent. A savings account you opened because your employer required it. None of these feels exotic, yet they still fall under US reporting rules.
This is often where people say, “But the IRS can’t see that.” Maybe. Maybe not. Either way, visibility isn’t the standard. Obligation is.
Filing a return does not always mean owing U.S. tax
Here’s the part that usually brings relief.
Many Americans abroad don’t end up owing US tax at all.
The tax code includes mechanisms designed specifically to prevent double taxation. The most common are the Foreign Earned Income Exclusion and the Foreign Tax Credit. Used properly, they can reduce a US tax bill significantly, sometimes all the way to zero.
However, and this is the catch, these benefits are not automatic. They don’t apply unless you file a return and actively claim them. No return means no exclusion. No credit. Just a growing compliance gap that doesn’t look urgent until suddenly it does.
So yes, filing is mandatory. Paying is situational.
That difference changes how the whole system feels.
Why do so many Americans abroad still get into trouble
When problems arise, they’re rarely dramatic at first.
Someone assumes that paying tax locally is enough. Another relies on a local accountant who’s excellent at domestic rules but unfamiliar with US ones. Someone else delays filing because the process feels overwhelming, then lets another year pass. And another.
Foreign account reporting is another common blind spot. It’s not intuitive, and it’s separate from the tax return itself. Miss it long enough, and penalties, at least on paper, can look alarming.
What’s striking is how rarely this comes from bad intent. Most cases start with good faith and incomplete information.
When things get more complicated than expected
At some point, simplicity gives way to layers.
- Owning a small business overseas.
- Investing locally.
- Moving between countries.
- Getting married to a non-US spouse.
- Realizing you’re behind on filings.
Each change adds friction. Not because the rules are cruel, but because US expat taxes sit at the intersection of two systems that don’t talk to each other very well.
That’s usually when people stop Googling and start looking for clarity.
Get clarity on your U.S. tax obligations abroad
If you’re living outside the US and trying to make sense of your tax position, you don’t need generic advice. You need context. The kind that comes from working with Americans abroad every day.
Expat Tax Online focuses exclusively on US expat tax matters, from simple annual filings to more complex international situations. The goal isn’t to make taxes feel clever. It’s to make them feel manageable.
Sometimes, one clear conversation is all it takes to replace years of uncertainty.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
