For many Americans living abroad, the scariest day this month isn’t Halloween but October 15—the final extended deadline for submitting income tax returns to the Internal Revenue Service (IRS).
An estimated 3.3 million U.S. citizens reside overseas, though the figure likely understates the total since the government does not maintain a complete roster or require Americans abroad to register their residence. Nevertheless, American citizens and resident aliens living outside the United States must pay U.S. income taxes and satisfy domestic filing obligations, regardless of where they reside or work. They also must navigate the intricate process of reporting foreign bank accounts, properties, and financial interests held in foreign institutions.
When Americans abroad file their income tax returns, most have no U.S. tax liability. In its 2025 Annual Report to Congress, the Taxpayer Advocate Service—an independent IRS office that assists taxpayers with problems—notes that for Americans overseas, the share of individual international tax returns showing no tax liability is significantly higher than among domestic taxpayers. Yet the report characterizes the filing process as “complex, overlapping, and punitive,” and warns that failure to comply can lead to “harsh and disproportionate penalties…even when taxpayers make good-faith mistakes or owe no U.S. tax.”
Compared to other high-income nations, the U.S. income tax rate is relatively low, so expatriates often end up paying more in local taxes than they would if they stayed in the U.S. However, Brandon Mitchener, executive director of Tax Fairness for Americans Abroad, told Reason that many Americans abroad are unaware of their tax responsibilities, assuming exemption because they already pay taxes in their country of residence. He notes that the complexity of U.S. tax laws and financial regulations pushes many expatriates to request an extension to October 15.
The date also marks the final deadline for the Foreign Account Tax Compliance Act (FATCA) and the Report of Foreign Bank and Financial Accounts (FBAR)—rules requiring Americans with foreign financial assets above certain thresholds to declare their asset values to the IRS or the Treasury Department.
Under FATCA, Americans living overseas with foreign financial assets exceeding $200,000 at year-end or more than $300,000 at any point during the year must disclose their holdings when filing their income tax return. The law also obliges foreign financial institutions to report information about U.S. account holders directly to the IRS. Initially enacted to catch Americans abroad who evade taxes or engage in other illicit financial activity, FATCA has instead made U.S. citizenship seem a hindrance for expatriates seeking to save or invest money outside the United States.
“Because of FATCA, many foreign financial institutions shun American clients,” says Mitchener. This is illustrated by Trade Republic, a German digital bank and online broker that “doesn’t accept” U.S. citizens living abroad—a category it distinctly labels as “FATCA customers.”
“Some charge a premium for banking-while-American,” he adds, while others have “even de-banked American clients.” This prospect is a real concern for Madison Berry, an American residing in the Netherlands, who tells Reason she’s “a little bit worried” that her European bank might one day “come back and be like, ‘Oh, you’re a U.S. citizen. We’re gonna close your account.’”
This situation limits choices and drives up the cost and complexity of everyday financial products for Americans abroad, from basic savings accounts to mortgages and retirement savings, Mitchener says, creating problems that are particularly pronounced for citizens of the United States and a country like Eritrea—the only two nations that tax citizens living outside their borders.
To add to the difficulty, Americans with foreign accounts exceeding $10,000 must file an FBAR with the Treasury Department’s Financial Crimes Enforcement Network, even though the form duplicates much of the information already reported through FATCA. The combined reporting demands make saving or investing abroad prohibitive for Americans and can prompt foreign banks to close existing accounts or refuse to open new ones, according to a 2019 Government Accountability Office report. Seven years on, little has changed. The IRS itself acknowledges that its systems and functions are “inaccessible to or incompatible with the needs of taxpayers living abroad, creating unnecessary barriers to compliance.”
Berry describes her tax obligations and reporting requirements as leaving her in “financial limbo.” “I seriously considered renouncing my U.S. citizenship as part of the process just to make life easier,” she says. She isn’t alone in contemplating such a step.
Several Americans living overseas who spoke with Reason on the condition of anonymity indicated they were also weighing renunciation rather than continuing to navigate the burdensome annual filing process. One American living in Ireland who runs a U.S.-based business says she uses a remote desktop and a virtual private network to access her financial institutions in order to avoid scrutiny.
Another individual told Reason she’s considering renouncing because America’s tax system feels “predatory in how complicated it is and how much responsibility it places on ordinary people to figure everything out themselves.”
