How To File US Taxes From Abroad: IRS Form 1040

by | 20 February, 2025 | IRS general forms

If you’re a US taxpayer living abroad, at some point you’ll probably need to research “how to file US taxes from abroad.” Form 1040, the US Individual Income Tax Return, is the cornerstone of the US tax filing system. 

Every US taxpayer will use this form to report their annual income and calculate their tax liability, regardless of whether they live in or outside of the US. 

This guide provides a detailed overview of Form 1040, including its purpose, structure, and filing requirements. As usual, we highlight specific considerations for US taxpayers living abroad.

What is Form 1040?

Form 1040 is the standard federal income tax return form used by individuals to report their annual income, deductions, and credits. It serves as the primary means by which the IRS assesses how much tax is owed (or whether a refund is due).

Form 1040 replaced earlier variations, such as Form 1040A and 1040EZ, streamlining the process for all taxpayers. (Form 1040A and 1040EZ are no longer used.)

Who Must File Form 1040?

The requirement to file Form 1040 applies to:

  • US Citizens and Green Card Holders: These individuals are required to report their worldwide income to the IRS, even if they reside outside the US.
    • Note that this category applies to anyone who holds US citizenship, even if they have never lived in the United States. Folks who find themselves fitting this description are referred to as, “Accidental Americans,” and it’s not uncommon to renounce US citizenship due to the burden citizenship-based taxation carries. (1) 
  • Resident Aliens: Individuals who meet the substantial presence test or other criteria for US tax residency must file Form 1040.
  • Non-US People (“Nonresident Aliens”) with US Connections: Certain people fall under the IRS’ categorization “nonresident aliens,” such as those with income effectively connected to a US trade or business. These individuals may also need to file, though they often use a different form (1040-NR).

Structure of Form 1040

Form 1040 is divided into sections to capture various aspects of an individual’s financial situation. Below is a breakdown of the key parts:

  1. Personal Information: This section collects the taxpayer’s name, Social Security number, filing status, and details about dependents.

PRO TIP: the address on Page 1 of the Form 1040 is your mailing address. It does not need to reflect your place of residence abroad. We typically recommend keeping a US-based mailbox if you live in a country with a notoriously difficult post to ensure you receive any communications from the IRS on time.

  1. Income: Taxpayers must report income from all sources, including wages, self-employment income, interest, dividends, capital gains, rental & royalty income, profits from an S Corp or Partnership, and foreign earnings. For US taxpayers living abroad, this section often includes income earned in a foreign country.
  2. Adjustments to Income: Common adjustments include contributions to a health savings account (HSA), IRA deductions, and student loan interest. Also, Foreign Earned Income Exclusion (attach Form 2555), GILTI Inclusion
  3. Deductions: Taxpayers can choose between the standard deduction and itemized deductions. Given the high standard deduction, taxpayers must have several thousand dollars in potential deductions for itemizing to be worthwhile. 
  4. Credits: Tax credits, such as the Foreign Tax Credit (FTC) claimed using Form 1116, help reduce tax liability. Other credits include the Child Tax Credit, the Earned Income Tax Credit, and education credits.
  5. Tax Calculation and Payments: This section determines the total tax owed, payments made, and whether a refund or additional payment is due.
  6. Signatures: The form must be signed and dated by the taxpayer and, if applicable, their spouse or paid preparer.

Special Considerations for US Taxpayers Living Abroad

Filing US taxes from abroad is one of many new and foreign experiences Americans have when they move outside the US. For starters, many aren’t sure if they need to continue filing, and if so, why. Below, we explain why most Americans living abroad need to continue filing a US tax return, and provide an overview of a couple of the most common forms used when filing US taxes from abroad.

Worldwide Income Reporting

Due to the citizenship-based taxation model in force since the Civil War, US taxpayers living abroad are required to report their worldwide income, regardless of where it is earned. This includes:

  • Wages or salaries from foreign employers
  • Self-employment income
  • Investment income (interest, dividends, capital gains)
  • Rental income from properties abroad

Failure to report foreign income can result in penalties and increased scrutiny from the IRS.

Foreign Earned Income Exclusion (FEIE)

Taxpayers living abroad may qualify for the FEIE, which allows them to exclude up to $130,000 (for 2025) of foreign-earned income from US taxation. To claim the exclusion, they must meet specific requirements, such as the bona fide residence test or the physical presence test, and attach Form 2555 to their Form 1040.

Foreign Tax Credit (FTC)

If foreign taxes have been paid on income reported on Form 1040, taxpayers can claim the Foreign Tax Credit (Form 1116). This credit reduces US tax liability dollar-for-dollar for foreign taxes paid on the same income.

Additional Forms for Reporting Foreign Assets

US taxpayers with foreign financial accounts or other assets may need to file additional forms, including:

  • FBAR (FinCEN Form 114): Required for those with foreign accounts exceeding $10,000 in aggregate. Although this is technically a separate filing, submitted to the Financial Crimes Enforcement Network of the Treasury Department, it is recommended to file with your Form 1040.
  • Form 8938: Required for taxpayers with significant foreign financial assets, depending on filing status and residency.

Learn more about the Foreign Barnk Account Report (FBAR)

Filing Deadlines for Expats

While the standard tax filing deadline is April 15, US taxpayers living abroad receive an automatic, two-month extension to June 15. Note that the deadline to pay taxes remains as April 15.

Additionally, they can request an extension until October 15 if needed. However, any taxes owed must still be paid by April 15 to avoid penalties and interest.

Penalties for Non-Compliance

Failing to file Form 1040 or omitting required information can lead to significant penalties, including:

  • Failure-to-File Penalty: A penalty of 5% of the unpaid tax for each month the return is late, up to 25% of the total unpaid tax.
  • Failure-to-Pay Penalty: A penalty of 0.5% of the unpaid tax for each month it remains unpaid.
  • Accuracy-Related Penalty: If the IRS determines that a return contains errors due to negligence, taxpayers may face a penalty of 20% of the underpaid tax.

How to File Form 1040

Form 1040 can be filed electronically or on paper. Here are the steps:

  1. Gather Financial Records: Collect all income statements (e.g., W-2s, 1099s), foreign tax documents, and records of deductions or credits.
  2. Determine Filing Status and Dependents: Choose the appropriate filing status and list all qualifying dependents.
  3. Complete Form 1040: Fill out the form, including any necessary schedules and additional forms (e.g., Form 2555, Form 1116).
  4. Submit by the Deadline: File electronically through the IRS e-File system or mail a paper return to the appropriate IRS address.
  5. Pay Taxes Owed: Use online payment options or send a check to the IRS.

Wrapping Up

Form 1040 is the foundation of US tax compliance, required of all US taxpayers, including those living abroad. Understanding its purpose, structure, and filing requirements is essential for meeting your tax obligations and avoiding penalties. For US taxpayers living abroad, additional considerations like the FEIE, FTC, and foreign asset reporting add complexity, making professional assistance invaluable in ensuring accuracy and compliance.

If you have questions or need help preparing your tax return, consult a qualified tax professional who specializes in US expat taxation to make the process as smooth and stress-free as possible.

References

  1. https://www.irs.gov/individuals/international-taxpayers/relief-procedures-for-certain-former-citizens

IRS Form 1040 is the Foundation of US Tax Reporting

~ Nicolás Castillo, CPA

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Frequently Asked Questions

Have more questions? Then this section is for you!
Where is foreign earned income exclusion on 1040?
Schedule 1, line D is where you note the amount you’re excluding from taxable income. The IRS Form 2555 is where you complete the Foreign Earned Income Exclusion and demonstrate your ability to claim the provision.

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