Why Millions Of Americans, Especially Expats, Are Paying Too Much In Taxes : And How To Stop

Published on October 29, 2025

Each year, galore Americans – particularly those surviving overseas – overpay their taxes to nan IRS. This problem is felt much acutely by an expanding number of U.S. expatriates who are trying to navigate done nan U.S. taxation system. Experts constituent to a operation of reasons for overpayment: outdated withholding settings, unclaimed taxation credits, and messy IRS tax-reporting requirements. Unfortunately, galore Americans do not recognize that they are overpaying their taxes each year.

What Causes U.S. Citizens to Overpay Their Taxes?

Although taxation overpayment is simply a problem for each Americans, U.S. citizens surviving overseas person their ain group of problems. Expat Tax Online, a patient that specializes successful U.S. Expat taxes, lists respective reasons for taxation overpayment for Americans surviving successful nan U.S. and those surviving abroad.

Withholding Settings Not Changed

The astir communal logic group overpay taxes is that they do not alteration their withholding. Many Americans hide to alteration their withholding aft moving abroad, changing jobs, aliases starting a family. With nan IRS Form W-4 still un-updated, taxpayers tin extremity up withholding much than they owe. This is simply a peculiarly pressing rumor for expats, who whitethorn not beryllium alert of really their move affects their U.S. taxes.

Not Claiming Expat Tax Benefits

Tax expats not claiming taxation benefits designed to little their taxation burdens is common. An illustration of this is nan Foreign Earned Income Exclusion (FEIE), which allows Americans surviving overseas to exclude $130,000 of income successful 2025, which galore do not claim. Another important taxation benefit, nan Foreign Tax Credit (FTC), is utilized to offset taxes paid to overseas governments, but if nan taxation credits are misapplied aliases utilized inappropriately, they will lead to higher taxes than anticipated successful nan future.

Confusion Regarding FBAR and FATCA Reporting

Overreporting is different rumor caused by misunderstanding nan reporting requirements for overseas financial accounts. U.S. national expatriates must record nan Foreign Bank Account Report (FBAR) and complete nan Foreign Account Tax Compliance Act (FATCA) requirements. Some taxpayers study overseas accounts excessively fearfully and record incorrectly. Not each overseas relationship is taxable, and overreporting accounts to nan IRS often results successful overpaid taxes.

Unclaimed U.S. Tax Credits

Expatriates are still eligible for U.S. taxation credits that straight trim taxation liabilities. Taxpayers whitethorn place nan Child Tax Credit, acquisition credits, deductions for status relationship contributions, and different credits, thereby expanding nan taxation liability. Missing retired connected unsophisticated taxation credits intends taxpayers are spending overmuch much than they should be.

The “Just In Case” Strategy

Some taxpayers would alternatively salary much than underpay, reasoning this avoids imaginable penalties and risks. This strategy results successful an interest-free indebtedness to nan government. In addition, taxpayers still consequence nan chance of penalties, and use from nan money complete nan taxation period.

Incompetent Advisors

Many expats guidelines taxation decisions that are jurisdictionally local, reasoning nan accountants assigned to them are U.S. compliant. This leads to nonaccomplishment of opportunities, erroneous returns, and result overpayment of taxes. Forms 2555, 8938, and 1116 are U.S. taxation forms basal to expats that professionals are unfamiliar with.

Repetition of Last Year’s Return

Another prevalent rumor is reiterating nan erstwhile year’s taxation return without assessing nan factors that mightiness impact nan return a payer should record successful nan coming year. Marital status, jobs, and moreover taxation treaties betwixt countries tin impact really a payer should file. Copying nan erstwhile return is astir apt to consequence successful nan payer passing complete immoderate deductions aliases credits disposable to them, and causing them to overpay successful taxes.

How Expats Can Avoid Overpaying Taxes

In taxation overpayment situations, nan proposal of taxation professionals to U.S. taxpayers, specifically expats, is to ever beryllium connected nan lookout and often set their taxation setup. For example, utilizing nan IRS Withholding Estimator is simply a awesome measurement to guarantee that nan correct magnitude is withheld, according to one’s existent situation. Moreover, expats should person a broad knowing of nan benefits of nan FEIE and nan FTC to utilize them appropriately to relax their taxation burden.

Even while surviving abroad, expats should guarantee that they tin declare each U.S.-based credits and deductions. Considering nan complexities of U.S. taxation laws that use to citizens surviving abroad, moving pinch a U.S. taxation master who focuses connected expat taxes and is based successful nan U.S. is simply a necessity.

The Necessity of Professional Tax Assistance

The U.S. taxation code, particularly unfathomable to expats, requires moving pinch personification who knows nan ins and outs of moving pinch taxes from abroad. This assistance tin consequence successful thousands of dollars successful savings by identifying imaginable credits, deductions, and exclusions that are disposable to nan payer and that nan payer tin legally claim.

Expat Tax Online states that by readying and looking for professionals, U.S. taxpayers tin debar overpaying taxation and support much of their hard-earned income. Knowledgeable professionals supply entree to benefits that are legally disposable to taxpayers and guarantee compliance pinch IRS regulations truthful that their clients are not unnecessarily losing their hard-earned income.

Conclusion: Improving Tax Efficiency for Expats and Americans Living Abroad

The taxation situations of U.S. expats are incredibly complicated, and galore Americans are simply unaware of their taxation situations and are overpaying taxes, and almost nary of them are getting nan benefits that nan outdated taxation laws provide. Understanding nan credits and exclusions disposable and moving pinch experts successful taxation rule helps Americans, nary matter wherever successful nan world they are successful nan world reclaim their hard-earned income from nan outdated taxation laws, and reclaim their benefits that they are entitled to.