What is a US 1040 tax returns for American expats living abroad

Simon Misiewicz

Expat & Property Tax Specialist

8th March 2022

1040 Tax filing - Who should you file US tax returns?

Americans can see how to file 1040 tax returns using the decision tree that the IRS created to help tax filers understand the basics

There are different ways that American expats living abroad can file US tax returns. It very much depends on the tax status of the individual, according to the IRS

– Single (not married, legally separated/divorced, widowed at the start of the
tax year)

– Married filing jointly

– Married filing separately

Head of household

– Qualifying widower (widowed in the tax year or entitled to file married file jointly, have dependent children, paid more than 50% of the household costs)

If a widower remarries before the end of the tax year, their previous spouse must have a tax return as Married Single.

Per Sec. 6013(a)(1) a joint return is not allowed if one spouse was a nonresident alien (NRA) at any time during the tax year unless the U.S. citizen and the Non-Resident Alien spouse so elect and agree to be taxed on their worldwide income.

Generally, if one spouse files separately, so must the other. An exception is if the other spouse qualifies as head of household while married. Then one spouse may file separately, and the other may file as head of household.

Two individuals are treated as legally married for the entire tax year if, on the last day of the tax year, they are:

– Legally married and cohabiting as spouses

– Legally married and living apart but not separated under a valid divorce decree or separate maintenance agreement

– Separated under a valid divorce decree that is not yet final

There are many tax considerations to be taken into account for each, especially if you are married or have dependents / are a dependent. Choosing the incorrect filing method could result in more US tax being paid to the IRS.

It would benefit American expats living abroad to review the “Determination of filing status – Decision tree”. See how you should file your US tax return with the United States of America IRS.

1040 tax filing - Taxes are higher for married filing separately

Special rules apply to Married Filing Separately taxpayers, resulting in a higher tax. For example, when filing separately:

– The tax rate is generally higher than on a joint return.

– Taxpayers cannot take the child and dependent care credit, earned income credit, education credits, or other benefits and credits.

– Some credits and deductions, such as the child tax credit and the retirement savings contributions credit, are reduced at income levels that are half those for a joint return.

– If a taxpayer is Married Filing Separately and the spouse itemizes deductions on their return, the taxpayer must itemize and cannot take the standard deduction.

Married taxpayers sometimes choose to file separate 1040 returns when one spouse does not want to be responsible for the other spouse’s tax obligations or because filing separately may result in a lower total tax.

Suppose one spouse has high medical or miscellaneous expenses or large casualty losses. In that case, separate returns may result in lower total taxes because a lower adjusted gross income allows more expenses or losses to be deducted.

Another common reason taxpayers file as Married Filing Separately is to offset their refund against their spouse’s outstanding debts.

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1040 filing - Head of household with the IRS for American expats

A qualifying person for Head of Household is defined as:

– A qualifying child who is single (whether or not the child can be claimed as a dependent)

– A married child who can be claimed as a dependent

– A dependent parent

– A qualifying relative who lived with the taxpayer more than half the year and is one of the relatives listed

The Head of Household filing status provides a higher standard deduction and, generally, a lower tax rate than Single or Married Filing Separately.

Are there 1040 filing extensions for ex-pats with the IRS?

US tax information is reported on a calendar year basis even if you are an American living in a country that taxes on a fiscal year, such as the UK and Australia.

If you are an American citizen or a US person abroad, you can get an extension to file your 1040 US tax return to the IRS.

An automatic two-month extension is available by default to US citizens or resident aliens who live outside the US.

The tax return must be filed during this additional period, but the federal income tax must be paid on the regular date of your return.

Another six-month automatic extension allows you to have more time to file your 1040 US tax return from abroad if you cannot complete it by the regular due date.

This does not apply to the time to pay your taxes.

To get this extension, file Form 4868 and illustrate your estimated tax liability based on available information.

To gain this six-month extension, you must meet the following requirements:

– You are a US citizen or resident alien

– You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due

– Your tax home is a foreign country/countries throughout your period of bona fide residence or physical presence

You must also file Form 2350 to the IRS.

What information is needed to file my IRS US ex-pat 1040 tax return?

Gathering information is as important as filing a US ex-pat 1040 tax return to the IRS for American epxats living abroad.

Some of the documents you will need for your tax return include:

– Even if you are filing US taxes from abroad, you must provide all wage reporting forms. If you are a self-employed US person abroad, give your tax specialist precise records of your earnings before deductions and expenses.

– Interest and dividend income: if you deposited money into a foreign bank or financial institution and they pay you interest, this is classified as interest income. Dividend income is from a company’s earnings to shareholders from stocks or mutual funds you own.

– Securities and stocks: if you own investments in any country, including the US, you need to report this on your tax return in the form of capital gains and losses during the year. You will need accurate information on each transaction, including purchase and sale prices, transaction fees and purchase and sale dates.

– Real estate: any real estate bought and sold is relevant to your US tax return. If you own a rental property, you must provide income and expenses during the year.

– Distributions including pensions, annuities, and profit-sharing plans: If you have payments coming from foreign social security and/or pension and do not have an end-of-year statement, you will need to keep track of payments and report them as income if filing US taxes from abroad.

– Other types of income: this can include reporting any partnership, trust or business interest that you hold and any other types of income not mentioned.

You may be interested in our main Article on UK Tax status if you want to move to the UK or from the UK. You may also be interested in knowing more about our property tax services if you want to invest in UK buy-to-let properties.

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Form 1116 Foreign Tax Credits & Form 2555 Foreign Earned Income Exclusion

American expats living in the UK or British people living in America need to be aware of two deductions.

The first is a foreign tax credit on income earned in the UK or other foreign countries. There is an allowance for a tax credit against your US tax for the amount of tax already paid in the foreign country.

The second is the foreign-earned income exclusion, where a sum of money is deducted away from foreign earnings and will not give rise to a tax liability in the United States. This means that the IRS will not tax this money.

It is essential to know which is best for you a) foreign tax credit or b) foreign earned income exclusion.

Other forms that need to be filed in the United States

We also need to be aware that other forms may need to be filed in conjunction with the 1040 expat tax return:

Form 8938  Statement of Specified Foreign Financial Assets

Form 1099 Misc income

Form 1116 – Foreign tax credit

Form 2555 – Foreign income exclusion

Form 8833 – Treaty-Based Return Position Disclosure.

Form 5471 – Information Return of US Persons With Respect to Certain Foreign Corporation

Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a US Trade or Business

Form 8865 – Return of US Persons with Respect to Certain Foreign Partnerships

Form 8621 – Information Return by a Shareholder of a Passive Foreign Investment Company (PFIC)

Form 3520 – Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520A – Annual Information Return of Foreign Trust with a US Owner


As you can see, this list is considerable and could lead to a great deal of confusion. That is why working with a qualified expat tax accountant is essential. Optimise accountants recruit the best qualified US and UK tax accountants to help you file all the relevant forms whilst being tax-efficient in all countries.

US taxpayers who own foreign financial accounts must report those accounts to the US Treasury Department, even if the accounts don’t generate any taxable income. Taxpayers should file a Report of Foreign Bank and Financial Accounts (FBAR) electronically by April each year using the BSA E-Filing System. See Report of Foreign Bank and Financial Accounts (FBAR) for further details.

United States (US) 1040 Tax returns for American expats living abroad as a foreigner to the Internal Revenue Service (IRS)

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