Expat Tax Compliance

Instructions

Provide comprehensive cross-border tax compliance guidance for US citizens living or planning to live abroad. All guidance is educational — always recommend engagement with a qualified cross-border CPA or tax attorney for filing decisions.

US Worldwide Taxation Obligations

US citizens owe federal income tax on worldwide income regardless of country of residence. This creates dual reporting obligations:

Filing Requirements (All US Expats)

Form	Threshold	Deadline	Penalty for Non-Filing
Form 1040	Standard filing thresholds	June 15 (auto extension abroad) / Oct 15 (with extension)	Failure-to-file penalties + interest
FBAR (FinCEN 114)	$10,000 aggregate in foreign accounts at any point in the year	April 15 (auto extension to Oct 15)	$10,000+ per violation (non-willful); $100,000 or 50% of account (willful)
FATCA (Form 8938)	$200,000 (end of year) or $300,000 (any time) for expats filing single	With Form 1040	$10,000 per form; up to $50,000 for continued non-filing
Form 2555	Claiming FEIE	With Form 1040	Loss of exclusion
Form 1116	Claiming FTC	With Form 1040	Loss of credit

Key Exclusions and Credits

Foreign Earned Income Exclusion (FEIE) — Form 2555:

• Excludes up to $130,000 (2026, indexed for inflation) of foreign earned income
• Requires bona fide residence test OR physical presence test (330 days in 12-month period)
• Does NOT apply to: investment income, Social Security, pensions, self-employment tax
• Housing exclusion available for qualifying housing costs above base amount

Foreign Tax Credit (FTC) — Form 1116:

• Dollar-for-dollar credit for taxes paid to a foreign country
• Often more beneficial than FEIE for higher earners
• Can carry forward unused credits 10 years
• Must be income tax (not VAT, property tax, or social charges unless treaty-qualified)

FEIE vs. FTC decision matrix:

Situation	Recommended Approach
Foreign tax rate lower than US rate	FEIE + FTC on remaining income
Foreign tax rate higher than US rate	FTC only (generates carryforward credits)
Self-employed abroad	FEIE doesn’t reduce SE tax; consider FTC
Investment income significant	FTC (FEIE doesn’t cover investment income)
Planning to return to US	FTC (FEIE recapture rules apply)

Tax Treaty Application

US-Spain Tax Treaty

• Covers income tax, wealth tax
• Pension article: US Social Security taxable only in US
• Spanish Social Security taxable only in Spain
• Interest and dividends: reduced withholding rates
• Does NOT eliminate Spanish income tax on worldwide income for residents

US-France Tax Treaty

• CSG/CRDS (social charges): IRS historically disallowed as foreign tax credit; 2019 protocol clarified some eligibility — verify current status
• French wealth tax (IFI) on real estate: not creditable against US tax
• Pension article: generally taxable only in country of residence
• Saving clause: US reserves right to tax its citizens as if no treaty existed

US-Italy Tax Treaty

• Italian IRPEF creditable against US tax
• Pension provisions: generally taxable in country of residence
• Italian regional/municipal surtaxes: creditable as income tax
• Italy’s flat tax regime for new residents (€100,000/year on foreign income): interaction with US treaty requires careful planning

Country-Specific Obligations

Spain

• Modelo 720: Annual declaration of overseas assets >€50,000 (per category: accounts, securities, real estate). Filing: January 1 – March 31. Penalties significantly reduced after EU court ruling but still mandatory.
• IRPF: Progressive rates 19%–47% (varies by autonomous community)
• Beckham Law: Flat 24% tax option for qualifying new residents (limited to employment income)
• Modelo 100: Annual income tax return, due June 30
• Wealth Tax (Impuesto sobre el Patrimonio): Varies by region; some regions exempt

France

• CSG/CRDS: Social charges on investment income (17.2%). Treaty credit eligibility is complex.
• Income Tax: Progressive rates 0%–45% on worldwide income for residents
• Declaration of Foreign Accounts: Form 3916 — mandatory disclosure of foreign bank accounts
• Wealth Tax (IFI): On net real estate assets >€1.3M
• Filing: Annual declaration May-June via impots.gouv.fr

Italy

• IRPEF: Progressive rates 23%–43% plus regional/municipal surtaxes
• Flat Tax Regime: €100,000/year lump sum on all foreign-source income for new residents (15 years max)
• IVAFE: Tax on foreign financial assets (0.2%)
• IVIE: Tax on foreign real estate (0.76%)
• Monitoring Fiscale (RW): Annual declaration of foreign assets in tax return

Retirement Account Taxation Abroad

Account Type	US Tax Treatment Abroad	Foreign Country Treatment
Traditional IRA/401(k)	Distributions taxed as ordinary income	Varies by treaty; generally taxable in country of residence
Roth IRA	US tax-free distributions	Many countries don’t recognize Roth tax-free status — taxable as income
Social Security	May be exempt from foreign tax under treaty	Treaty-dependent; often taxable only in US
Foreign pension	Taxable in US on worldwide income basis	Check treaty pension article

Critical Deadlines Calendar

Month	Obligation
January	Spain Modelo 720 window opens
March 31	Spain Modelo 720 deadline
April 15	FBAR deadline (auto-extends to Oct 15); estimated tax payment Q1
May-June	France annual tax declaration; Spain Modelo 100; Italy 730/Redditi
June 15	US Form 1040 auto-extended deadline for expats abroad; estimated tax Q2
September 15	Estimated tax payment Q3
October 15	FBAR final deadline; Form 1040 extension deadline
January 15	Estimated tax payment Q4

Split-Year Filing

When relocating mid-year:

• US: File full-year 1040 with worldwide income; prorate FEIE by days qualifying
• Foreign country: File as tax resident from date of arrival; declare worldwide income from that date
• Coordinate timing to avoid double taxation on transition-period income
• Document the exact date of tax residency establishment in each country

Inputs Required

• Current country of residence and planned destination(s)
• Income sources (employment, self-employment, investments, pensions, Social Security)
• Foreign bank account balances (for FBAR threshold)
• Foreign asset values (for FATCA threshold)
• Tax residency dates (current and planned)
• Retirement account types and balances
• Real estate holdings (domestic and foreign)

Output Format

## Expat Tax Compliance Assessment

### Filing Obligations
| Form/Declaration | Required? | Deadline | Status |
|-----------------|-----------|----------|--------|
| US Form 1040 | Yes/No | [date] | [filed/pending/overdue] |
| FBAR | Yes/No | [date] | [filed/pending/overdue] |
| FATCA Form 8938 | Yes/No | [date] | [filed/pending/overdue] |
| [Country-specific] | Yes/No | [date] | [filed/pending/overdue] |

### Recommended Tax Strategy
- FEIE vs. FTC recommendation with rationale
- Treaty benefits applicable
- Country-specific elections available

### Risk Areas
- [Identified compliance risks]
- [Penalty exposure for non-filing]

### Professional Referral
- Recommended: [Cross-border CPA / Tax attorney / Enrolled agent]
- Specific expertise needed: [areas]

Anti-Patterns

• Filing only in the US — Tax residency abroad creates foreign filing obligations that carry their own penalties
• Assuming FEIE is always best — FTC is often superior for higher earners or those in high-tax countries
• Ignoring FBAR/FATCA — Penalties are severe and the IRS actively pursues non-filers
• Treating Roth IRA as universally tax-free — Most foreign countries tax Roth distributions as income
• Missing Modelo 720 / Form 3916 / RW — Foreign asset reporting obligations exist independently of income tax
• Applying treaty benefits without analysis — Treaties have saving clauses and specific conditions; blanket assumptions are dangerous
• DIY filing for complex situations — Cross-border tax is specialist territory; always engage a qualified professional
• Ignoring self-employment tax — FEIE does not reduce SE tax; totalization agreements may apply