US Tax Filing Rules for Americans Living in Ireland

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Welcome to Taxbytes for Expats, the top tax tips you want to know as an expat. The podcast is here to help answer the common queries and concerns expats have when moving to or from Ireland.
Complex taxes explained simply. We’ll focus on the Irish and international tax issues to be aware of to ensure you save time, money, and stress.

Stephanie Wickham
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Hey everyone, welcome back to this episode of Taxbytes for Expats. Today I am talking to Josh Katz. Josh is a US CPA and the founder of Universal Tax Professionals.
Josh specializes in US tax compliance and planning for Americans living abroad, which, as many of you will know, is one of the areas where the paperwork can.Follow you no matter where you are in the world.
He works with clients in more than 50 countries, helping them navigate everything from foreign earned income exclusions and IRS compliance programs to foreign companies, trusts, investments, and those lovely reporting forms that can cause more than a little panic.
What we really like about Josh’s approach is that he focuses on making the complex rules practical and manageable so that expats can stay compliant, reduce risk, and make informed decisions with a bit more confidence.
Really nice to catch up with you and have you on the podcast.

Josh Katz
Yeah, thank you so much for having me.

Stephanie Wickham
It’s great. It’s a pleasure. So, obviously, some of our clients will know we work together quite frequently and we have a lot of clients who we both service.
But I think the aim of today’s episode is to share information with new listeners, existing listeners, and clients alike. So, before we jump into all of that, what might be helpful is for anybody who doesn’t know.
You yet and who’s listening. Tell us a little bit about your background. Tell us about Universal Tax Professionals and the type of clients that you work with generally.

Josh Katz
Sure. So, Universal Tax Professionals, we founded about 13 or so years ago, aimed at helping Americans living abroad.
We have clients all over the world. Some countries we work with more. We work with a lot of clients who are living in Ireland, moving to Ireland, or possibly moving from Ireland.Ireland to the US or back to the US, or even just thinking about it.
We do a lot of planning to help clients decide. And we also work with a lot of clients who maybe just found out that they have to file. So we’ll help them get into compliance with the US tax system.
Our clients have a big range from clients who need to do annual filings to clients who have small businesses. We also will work with some small to medium sized businesses.
Help them make sure they stay compliant and get compliant with their U.S. taxes.

Stephanie Wickham
And the U.S. tax system is one of the very few systems in the world that kind of taxes based on citizenship. And so that makes it pretty different, doesn’t it, from most other countries?

Josh Katz
Yeah. It’s often unfortunate, but you’re required to file a U.S. tax return for the most part, no matter where you live. Now, for a lot of Americans living abroad, this is justFormality.
They’ll have to file the return every year, do all the reporting. It doesn’t mean you have to pay taxes. So that’s kind of one of the biggest misconceptions. Oftentimes clients find out that they need to file a tax return after they move abroad and they go, whoa, I can’t pay taxes twice.
They’re not paying taxes twice. You might only be paying taxes to their country of residence, but it is a requirement to file not only a tax return, there’s another form called the FBAR. So most Americans living abroad have to file an annual tax return that goes to the IRS and then a FBAR, which stands for the Foreign Bank Account Report, which kind ofReport your foreign bank accounts and that goes to the Department of Treasury and it’s a requirement to file both of these annually.

Stephanie Wickham
Okay. And what about the clients who kind of say, okay, well, I’m filing abroad, so I don’t have to do this. What happens if you don’t? What’s the purpose of doing this or what’s the reason for compliance?

Josh Katz
The reason, well, you’re required to file.

Stephanie Wickham
So it’s not a choice.

Josh Katz
Yeah, it’s not a choice. And then there are possible penalties. So there’s a penalty for failure to file the FBAR and that penalty can be quite.Steep. It’s always changing, but it could be a $10,000 penalty for failure to file FBAR, which is just a simple form.
That’s one of the easiest forms. It just takes a little bit of time to go over your bank accounts. You’re going to report the highest balance of every foreign bank account. It would include any type of financial account, investment account.
And once a year, and you avoid that penalty. Now, a question I get is does everybody who doesn’t file the FBARReceive this penalty? Yeah, exactly.
The answer is no. They don’t always catch everyone. But there is an agreement in place with foreign countries that the U.S. will share information with those banks.
So foreign banks could possibly, I’m not saying that they always do or do every time for every person, but they’ll share information about the accounts of their U.S.
residents. So, you know, Irish banks can send the U.S. their information. Again, it’sThey don’t announce how often that happens or how it happens. But if the US wants to know what’s in a foreign bank, it is possible for them to find out.

Stephanie Wickham
And I think, you know, clients would see that. I’ve seen it myself. You know, you get a question, where are you tax resident? Or, you know, where are you? Certain questions that banks ask, it’s all feeding back into this kind of common reporting standard, FATCA, all these different things now that are relevant for kind of cross border clients, clients who have assets in different countries.
Countries and whether they’re connected with the US or not. Lean into that and thinking a little bit about what people know or think they know. What are the common misconceptions that you find people have when they talk to you and they’re no longer residing in the US in the general term with respect to their taxes?

Josh Katz
Definitely the number one misconception is I didn’t think I had to file. They thought, okay, if they’re not living in the US, then there’s no need to file.All the time. And then the second would be they thought you only had to file if you earn less than, sorry, if you earn more than $100,000.
So there is something called the foreign earned income exclusion, which allows you to exclude about $130,000 of your wages, which means that if you’re living abroad, you make less than $130,000.
You can use this exclusion and most likely you won’t owe any U.S. taxes on that income. But that doesn’t mean you don’t have to file. So a lot of times I’ll hear all the time, okay, well, I don’t needFile because I make less than $130,000.
Now, first of all, this is only wage income. And, you know, you can’t use it on passive income, on rental income, on pension income. But also, you would still need to file either way.
So, every once in a while, someone will come to say, Oh, I make less than $130,000, but it’s all from pension income and from, you know, other sources.
So that we see a lot. And then I would say the third biggest misconception is that, oh, I can’t believe I have to.Pay taxes twice. Well, you almost never pay taxes twice because you can almost always use a foreign tax credit, which would be a tax paid from another country.
Now, there are times where maybe something is, you know, some sort of income might be tax free in Ireland, but you still might have to pay taxes on that in the U.S. Now, that definitely doesn’t seem fair because when you’re living in Ireland and your neighbor is not going to pay any tax on a certain, you know, transaction or type of income, now, even though you’re living in Ireland, you’re going to have to pay it just to the U.S.
So definitely, you know, we see that that’s, you know,Less common for the average taxpayer, but it does happen from time to time. And then something else I’ll just mention now is when it comes to investing our PFICs.
So oftentimes we see clients making big investment mistakes when they invest in foreign mutual funds, foreign index funds, foreign ETFs that can be taxed heavily.
And that could be a time where, again, you may or may not be taxed twice, but definitely the tax treatment there is unfair.thing to do is to plan around it. There are ways to make sure that you don’t pay those taxes or you can avoid them or at least minimize them.
But that’s where really planning when it comes to investing is going to be important.

Stephanie Wickham
So I think there’s three kind of important takeaways from what you just said, even just kind of at the start of this conversation is, you know, first, you don’t presume you don’t need a tax return. Secondly, be conscious that if you have bank accounts in a location outside of the US, your reporting obligations change.
You know, simply perhaps, but change nonetheless.

Josh Katz
Yeah.

Stephanie Wickham
And thirdly, you know, investing outside of the U.S. as a U.S. citizen is that the criteria? Is when you need to kind of think a little bit more about what you’re investing in and the resulting U.S.
tax outcomes. Would they be fair points?

Josh Katz
Yeah, for sure. And, you know, we’ll work with clients who have a financial planner who’ve been working with the financial planner for years, and their financial planner was the one who suggested that they invest in certain funds, whichWhich are problematic.
So it’s definitely good to review investments with your accountant and make sure there are no, well, we call them PFICs. And that’s the term that there’s, that stands for passive foreign investment companies.
But usually we’ll see them as ETFs or mutual funds.

Stephanie Wickham
And it’s really interesting because we kind of have a similar issue from an Irish perspective where a lot of US individuals coming to Ireland, they may not have an Irish tax domicile.
And that’s obviously something that’s determined on a case by case basis. But we’ll generally want.To stay away from what we call offshore funds, which I think of as being similar to your PFIX.

Josh Katz
Yeah.

Stephanie Wickham
In other words, you know, kind of assets that are in the nature of co ownership, that collective investment type product. And so there’s a lot of challenges. You know, we’re pulling them one direction, go, don’t invest in this. You’re pulling them another and say, don’t invest in that.
It’s not an easy path to navigate. But let’s deal firstly with somebody who perhaps falls into the bucket that you mentioned, which is they’ve.
You know, in good faith, accidentally assumed that they don’t have to file. How do people get caught up if they are, they wake up in the middle of the night and they go, oh my goodness, I should have filed a US tax return.
I didn’t. What do they do?

Josh Katz
Yeah. So we see this all the time. But the IRS has a program called the Streamlined Filing Program. It’s a type of amnesty program which would allow you to file the past three tax returns, past six F bars, a few other forms, a statement of non willfulness, which says that, you know, you didn’t file because you didn’t know you had to file.
It was, it was.Not something that you were, you know, you were not doing this for the purpose of avoiding taxes, and the IRS will accept it, and you’d be able to avoid any penalty.
And you would also only be required to file the past three tax returns. So we’ll work with clients who haven’t filed in the last 20 years. This program allows them to just file three tax returns. The IRS will consider them up to date.
So going forward, they’ll be required to file, but they won’t, you know, face any penalty or be required to file previous years, assuming the program’s been accepted. And we’ve never had a client.Who has not had their streamlined submission accepted?
So, this is definitely the best way to go. It’s a good deal for anyone. Anytime someone’s eligible for the streamlined program, we would definitely recommend it.

Stephanie Wickham
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You know, is using an advisor there helpful or, you know, is it a problem if someone wants to do it themselves?

Josh Katz
So for a lot of people who move abroad and haven’t been filing, they probably don’t have a lot of experience with US taxes. So in general, an advisor is going to help.
If you’ve been living in the US and you move to,You know, Ireland and retire there, and you’ve been filing your U.S. taxes yourself every year, and you’re very familiar with the system, the forms, and how everything works.
You know, that person might be okay filing themselves going forward. But let’s say you haven’t been filing for 20 years. Obviously, you don’t know already a lot about the U.S.
tax laws because you didn’t know you have to file. You know, in addition to that, there are a lot of nuances. So I don’t want to say for sure you always need to work with a tax advisor, but, you know, it’s what we do every day. And the people who we work with, if weHave a client who comes to us and it looks like they could do it themselves, we’ll let them know this isn’t something that you would need us to help out with.
But usually, when it comes to this program, because there are a lot of intricacies, and even when someone may think that they could do it themselves, they might not know everything. So, generally, this is a time when we would recommend using an accountant because we’ll see people sometimes even who try it themselves, but they didn’t know they have to report the.
Form 5471 for a foreign corporation, or they didn’t know that the foreign gift they received had a special form, the Form 3520, to file. So, in general, the people who don’t have a problem are the people who’ve already been doing it in the U.S.
And it also depends. If you haven’t filed since you moved to Ireland, which is usually what we would see or moved abroad, maybe you moved abroad when you were 18 or 20 and never even started filing taxes in the U.S.
So, that’s oftentimes a case where someone says, I’m 40, I moved when I was 20.I’ve never filed US taxes.

Stephanie Wickham
And we see this as well because, like, just honing in on your point there, from our perspective, we struggle a little bit sometimes because if clients are trying to DIY their tax return, that actually can make the preparation of their Irish return a lot more complicated.
You know, we’ve had cases where we’ve done an Irish return and we’re relying on them to confirm that the US position is X so that we can claim credit for something.
Yeah.Security position is X in the US so that we can do something in Ireland. So I think, kind of, notwithstanding that people have experience doing the US return from our perspective, doing the Irish side, I much prefer when they use a US advisor because we can ask the questions that the US advisor can very quickly tell us.
It’s an alignment, isn’t it? It’s an alignment of basically you’re in new territory, you know, and that’s a difficulty. And I think probably people get a sense of that quite quickly, you know, even.
Just listen to what we’re saying. Your Irish return is not straightforward. Your US return has changed. Your investing capability in Ireland is perhaps different than what you might expect normally.
Your US investment profile looks different. There’s a few moving parts. Not every situation is super complicated, but it’s important, I think, to kind of appreciate those nuances.

Josh Katz
Yeah, for sure. I think, you know, the US has one of definitely one of the most complicated tax systems overall. And there also might be times, you know, when we’re working together, you’re asking questions.
us that we’re going to be able to answer. But I’ll give you one example. If you let’s say you we have a client and you wanted estimates of how much they’re going to pay, meaning you would file their Irish tax return first with some estimates that we provide you.
And then you would file their and then we would file your US tax return only after the Irish tax return is complete. So we can get because there might be two different types of income. There might be US source income and Irish source income. Well, if you’re a tax professional, this is what we do every day.
But this is not something that most people would be able to do. And also there’s no tax software. You know, TurboTax and may be able to, you know, some things it does okay, some things it doesn’t.
I mean, there are a lot of Americans living abroad who use TurboTax without a problem. What I like to say is the first thing is look at the amount you owe. I mean, if you owe a lot of money, that’s when it might be time to speak with someone.
But if you’ve been using, you know, I don’t want to say it’s always bad, but definitely they’re not going to be able to give you estimates to help you along. They’re also not going to be able to answer a question.
So if you have questions about,Domicile, or how we’re going to treat something, or we’re going to decide on it, then that’s going to be pretty complicated to do on your own.

Stephanie Wickham
Each case is different as well, isn’t it? We have clients who have very simple situations, and naturally they can kind of progress away from having technical specialists look at it and hand it to generic providers.
And it’s brilliant, but it’s just very case specific. I think the key thing is just don’t assume that nothing changed because you moved abroad.It did and act accordingly, initially at least.

Josh Katz
Yeah.

Stephanie Wickham
Foreign tax credits, double tax, the interaction between Irish and US tax, we get asked this all the time. And I know before we started to record, we were talking briefly about it and the question that comes up time and time again through the Irish lens you know, when do I have to file my Irish tax return, income tax return here we’re referring to?
So we have a very long lead in time in Ireland. And what I mean by that is, you know, you get.Practically 10 and a half, 11 months post the end of the tax year to file your tax return in Ireland.
So, by that, I mean, if you have a 2025 tax return, it’s actually not due in Ireland till about mid November in 2026. So, the following tax year is nearly over before you have to file and pay.
Clients scratch their heads very rightly because they go, Well, hang on a second. I have to file in the US in April. So, talk me through.And forth on this because we do it all the time.
Talk me through what filing as a US individual living outside of the US looks like. What deadlines do they have to think of? What are you asking them to provide? How do you work with the foreign advisor to kind of align?

Josh Katz
Let me ask you a question first. So, even though that’s the deadline, what’s the earliest you’re able to file in Ireland?

Stephanie Wickham
Great question. Million dollar question. So, generally, the tax software will get updated. It varies, usually in February.
So, there’s a process. Revenue will release their form. If you think about what revenue have to do, our finance act gets signed in usually around Christmas. So, therefore, the changes that get signed into law have to be make their way into a form.
That form doesn’t get released till about February. Then the software providers have to incorporate those changes into their software. So, for all the will in the world, there’s really very little ability to practically do an Irish tax return for the previous year untilAround the end of February.
Normally, we will go out to clients around. I think we went out probably the end of February this year with our questionnaire, and that’s incorporated all the changes that have been transposed into legislation and into the process.
So, February, let’s say. Sorry, long answer to a quick question.

Josh Katz
Yeah, yeah. Yeah. The general deadlines for the US is that the deadline is April 15th. But if you live abroad, you get an automatic extension till June 15th.
And for almost all of our clients, we’re applying for a regular extension, which will be till October 15th.And if you need extra time, you’re able to even apply for a second extension until December 15th.
And even with those deadlines, not every one of our clients file on time. And there’s ways to minimize any risk if you’re doing that. But in general, the majority of Americans living abroad are going to file by October 15th.
Most of our clients are still waiting for information. So April 15th is not even a possibility. But I speak with people every day and they say, well, how am I going to do this?My Irish taxes don’t need to be filed till November.
I say, well, even though they don’t have to be filed until that, maybe we can ask your accountant to see us or anyway, we can get it filed earlier. But most of the time, if you’re living in Ireland, you’re going to want to file your Irish taxes first.
Your Irish accountant may have questions for us, right? So sometimes you won’t be able to file a client’s return until we provide some estimates.

Stephanie Wickham
It’s a circular, like what’s the tax estimate on this? We claim it and then.And at one point, I want to, and you correct me if I’m wrong. Am I right in saying that there’s a reason to make sure that there’s, if there’s a tax payment due, that it’s made by April from an interest perspective?
Yes. So am I right there?

Josh Katz
Yes. Tax failure to pay penalty can start from April 15th. So if there’s, and the easiest way to avoid that is just pay an estimate. But it’s really hard for, you know, often because maybe if a client moved in the middle of the year, if there’s decisions that have to be made, you don’t always know.
And if you, you know, so sometimes,May want to choose to be extra careful and make a larger estimated payment. And sometimes you’ll wait to the end and see. But these penalties are, you won’t have a failure to file penalty.
You would just be the failure to pay penalty. But also, a lot of Americans living abroad aren’t even going to owe U.S. taxes. So if you’re not going to owe U.S. taxes, it’s not really a problem.
It’s only if you’re in a case where you may owe.

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