GTN Mobility Tax Blog

Important note on streamlined filing compliance procedures -- This article specifically discusses the streamlined foreign procedures, not the domestic procedures. To qualify for the foreign procedures, a taxpayer must meet the IRS’s non-residency requirement. For a US citizen, this means that in one of the past three years for which the original or properly extended US tax return due date has passed, they did not have a US residence and were physically present outside the US for at least 330 full days.

US citizens and permanent residents (green card holders) working outside the United States generally are still required to file annual US tax returns, and the IRS is constantly updating its technology to better locate non-filing taxpayers and bring them into compliance. However, in addition to increasing its enforcement capabilities, the IRS has also taken steps to encourage non-filers to come into compliance by waiving penalties for those taxpayers eligible to take advantage of the streamlined filing compliance procedures (streamlined procedures).

Navigating the complex landscape of US tax regulations can be daunting, especially for individuals who may have inadvertently found themselves delinquent in their tax filings. Many Americans living abroad, including "accidental Americans"—those who hold US citizenship by birth but have never lived or worked in the US—are often unaware of their obligation to file US tax returns. And this lack of awareness can lead to unfiled returns and substantial penalties.

The US is one of the only countries to require its citizens and permanent residents (i.e., green card holders) to file annual tax returns and report their worldwide income, regardless of their actual work location. When working outside the United States, it is often the case that US persons are subject to taxation in the county where they are physically located.

All US citizens and permanent residents must file federal income tax returns if they meet the Internal Revenue Service (IRS) filing threshold. The size of this threshold will vary depending on factors such as age, filing status, and type of income (e.g., income from employment or self-employment). For example, a single individual under the age of 65 would be required to file a 2024 US federal income tax return if their gross income exceeded $14,600. If the earnings came from self-employment, this same person would need to file a US federal tax return if their net earnings exceeded $400.

When a mobile employee relocates across borders, whether internationally or domestically within the US, they soon discover that their tax situation has become far more complex as a result of the move. If that employee is moving from a low-tax location to a high-tax one, they could potentially face a major increase in tax liability. Additionally, they may also encounter tax issues related to the sale or rental of their home, moving expenses for state reporting purposes, state residency issues, and a number of other issues they may not be prepared to handle on their own.

It may seem counterintuitive to a US citizen or permanent resident (i.e., a green card holder) who has just taken a new international job, that most will still be required to file US federal income tax returns after relocating. In addition to filing income tax returns, mobile employees may also have other filing obligations including estate or gift tax returns, estimated tax payments, and foreign bank account reports.