You may not know how to file your taxes if you are an American citizen working and living in another country. You may not even be aware that the US government and the IRS actually require that you file your taxes, even if you are outside of the country. Although methods are somewhat different, the process is relatively easy, and it's definitely a better choice than not filing at all, particularly if you would want to avoid a bigger IRS issue.

Many people assume that they have a free pass for not filing their taxes if they work overseas. They also believe that their taxes don't have to be paid, too. This is not the case, unfortunately. Regardless if you live in the US or in another nation, the IRS requires and expects everyone to file their tax returns, otherwise they'll be subject to a potentially substantial IRS issue.

When working in a foreign country, citizens and residents of the United States of America can use 2 types of tax forms. These are the the IRS Form 2555-EZ and Form 2555 (Foreign Earned Income).

What applies are similar general rules. Simply file your tax return by April 15th of every year, and if you require more time, the IRS actually gives an automatic extension to American citizens who are residing abroad. As a matter of fact, you will be offered an automatic 2-month extension, giving you more time to pay the correct tax debts due and file the right forms. But if you wish to utilize the 2-month extension, you must actually attach an official statement explaining and confirming that you truly qualify for the extension.

A problem that confronts people who've recently relocated overseas is that they did not get W-2 forms from their employers because they were sent to their old address; therefore, losing their tax information. It's your responsibility to obtain those documents. It must be done, whether that takes having your company to send a new copy or getting a good friend to track down your mail. Another option is to have your company send you electronic copies via email, while the official ones are being sent via regular physical mail systems. This will enable you to complete your tax returns in a timely manner and avoid an IRS issue.

You have a few choices in how to file your tax return if your spouse is not an American citizen. Filing as Married Filing Separately is one option. This means that only the income that you earned for that year is what you must declare. But you can qualify under the Head of Household status if you have children and provide more than half of each child's support. Lastly, there's a third option where you can actually choose to declare your spouse as a resident alien. This would be done for tax reasons, so you would essentially be filing as Married Filing Jointly.

There are numerous differences and subtle aspects when it comes to filing taxes while you're working and residing in another country. To avoid an IRS issue, consulting a professional tax preparer is recommended.