Critical: Americans must file US taxes regardless of where they live. Non-compliance carries severe penalties.
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US citizens and green card holders must file US federal tax returns on worldwide income, regardless of where they live.
This is true even if:
- You owe no US tax due to exclusions/credits
- You pay taxes in the Netherlands
- You have no US-source income
- You haven't lived in the US for years
- Who: All US citizens/green card holders meeting income thresholds
- When: April 15 (automatic 2-month extension to June 15 for expats; can extend to October 15)
- What: Report worldwide income including Dutch business income
Foreign Bank Account Report - THIS IS CRITICAL
- Who: Anyone with aggregate foreign account balances exceeding $10,000 at any point in the year
- What counts: ALL foreign accounts - bank, business, investment, pension, signature authority
- When: April 15 (automatic extension to October 15)
- Where: Filed electronically through FinCEN BSA E-Filing
- Penalties: Up to $10,000 per non-willful violation; $100,000 or 50% of account balance for willful violations
Common FBAR Mistakes:
- Thinking it's only for accounts over $10,000 (it's AGGREGATE of all accounts)
- Forgetting business accounts
- Not reporting accounts where you have signature authority
- Missing the filing deadline
Statement of Specified Foreign Financial Assets
- Threshold (living abroad): $200,000 end of year or $300,000 at any time
- What to report: Foreign accounts, foreign stocks, foreign partnerships, foreign trusts
- Filed with: Your Form 1040
- Note: This is SEPARATE from FBAR - you may need to file both
| Requirement | FBAR | Form 8938 |
|---|
| Threshold (abroad) | $10,000 aggregate | $200,000 year-end |
| Filed to | FinCEN (Treasury) | IRS (with 1040) |
| Assets covered | Financial accounts only | Accounts + other assets |
| Penalties | $10,000-$100,000+ | $10,000-$50,000 |
Form 2555
- 2024 exclusion: Up to $126,500 of foreign earned income
- Requirements: Must pass bona fide residence test OR physical presence test (330 days abroad in 12-month period)
- What qualifies: Self-employment income, wages (if you had any)
- What doesn't qualify: Investment income, rental income, pensions
Form 1116
- What: Credit for Dutch taxes paid on income
- Benefit: Prevents double taxation on the same income
- FEIE vs FTC: Can't use both on the same income - must choose strategically
- Carryover: Unused credits can carry forward
Generally:
- FEIE better if: Income under $126,500 and Dutch taxes low
- FTC better if: Higher income or Dutch taxes exceed US tax on that income
- Warning: Once you revoke FEIE election, you can't re-elect for 5 years
- Recommendation: Consult expat tax professional before deciding
DAFT holders running an eenmanszaak face this issue:
- What: 15.3% tax on self-employment income (Social Security + Medicare)
- Totalization Agreement: US-NL treaty may exempt you if paying into Dutch social system
- Form needed: Certificate of Coverage from Dutch SVB or US SSA
- Without certificate: You may owe US self-employment tax even on Dutch business income
Passive Foreign Investment Company rules - this catches many expats
- What are PFICs: Most non-US mutual funds and ETFs
- Why it matters: Punitive US taxation - gains taxed at highest rate + interest charges
- Common trap: Buying Dutch or European ETFs through Dutch broker
- Solution: Keep investments in US-domiciled funds through US broker
- Examples of PFICs: Anything on Euronext, any EU-domiciled ETF
Some US states continue to claim you as a tax resident:
- California: Very aggressive; may claim you for years after departure
- New York: Requires clear domicile change documentation
- New Mexico, South Carolina, Virginia: "Sticky" states with ongoing claims
To break state residency:
- File final "part-year" or "non-resident" return
- Document intent to leave permanently
- Change driver's license, voter registration
- Avoid maintaining home in that state
The tax treaty helps prevent double taxation but doesn't eliminate all obligations:
- Business profits: Taxed where business has permanent establishment
- Self-employment: Generally taxed in country of residence
- Dividends/Interest: May have reduced withholding rates
- Important: Treaty doesn't override FBAR, FATCA, or PFIC rules
If you owe US tax after exclusions/credits:
- Form 1040-ES: Quarterly payments due April 15, June 15, September 15, January 15
- How to pay: IRS Direct Pay, EFTPS, or international wire
- Penalty: Underpayment penalties if you owe too much at filing
You need a specialist, not a regular CPA:
- Credentials: EA (Enrolled Agent), CPA with international experience
- Questions to ask:
- How many expat clients do you have?
- Are you familiar with FBAR, FATCA, Form 2555?
- Do you know the US-NL tax treaty?
- Can you advise on PFIC issues?
- Recommended services: Greenback Expat Tax Services, Taxes for Expats, Bright!Tax, local firms with expat specialty
- Cost: $500-2,000+ depending on complexity
- Not filing at all: "I don't live there anymore" doesn't apply to US citizens
- Missing FBAR: Separate from tax return, easy to forget, huge penalties
- Buying European ETFs: PFIC nightmare - keep investments in US funds
- Using regular CPA: Expat taxes are specialized; errors are costly
- Ignoring state taxes: Some states will pursue you
- Assuming treaty eliminates obligations: It reduces but doesn't eliminate
| Filing | Original Deadline | Expat Extension | Maximum Extension |
|---|
| Form 1040 | April 15 | June 15 (automatic) | October 15 |
| FBAR | April 15 | October 15 (automatic) | October 15 |
| Form 8938 | With 1040 | With 1040 | With 1040 |
| Estimated Taxes | Quarterly | No extension | No extension |
This information is for general guidance only. US tax law is complex and individual situations vary. Always consult a qualified expat tax professional.