When will I be able to use Direct File as an American abroad?
We are advocating for it to be made accessible for Americans abroad as soon as possible, but it’s not available to us yet. It could be as early as the 2025 tax filing season but the IRS has yet to commit to supporting it. We are asking the IRS to publicly commit to a date so that we know that they are seriously working on making Direct File inclusive for Americans abroad.
Who is eligible to use Direct File?
The IRS confirmed on October 3, 2024 that Direct File would be made available for residents of 24 states in the 2025 tax filing season, limited to certain income sources. If the IRS expands Direct File for Americans abroad, those who have foreign earned income with a simple tax return will be eligible by filing for the Foreign Earned Income Exclusion (Form 2555). You can read more about those who will be able to use Direct File in 2025 here.
Why isn’t this a letter supporting Residency Based Taxation (RBT)?
There is still a lack of understanding on international tax issues in order for elected officials to take a position and come out in support of RBT. Many of our champions in Washington D.C. that have come out in support of American abroad tax issues including Representatives Jamie Raskin, Dina Titus, and Don Beyer.
Is this reinforcing Citizenship Based Taxation (CBT)?
Asking the IRS to provide equivalent stateside services for Americans abroad isn’t reinforcing CBT. If anything, it highlights the cost of administering the current system and the severe disadvantages that Americans abroad face compared to stateside Americans who receive considerably more help and support to file a tax return, which is in violation of the Taxpayer Bill of Rights. Emphasizing the severe lack of services to support Americans abroad in maintaining tax compliance demonstrates the difficulty in effectively running a CBT tax system and it supports arguments of RBT’s taxation based on income source rather than citizenship.
Aren’t you concerned that advocating for an incremental fix will make it look like Congress has fixed the problem and they won’t help pass Residency Based Taxation?
Direct File would be a free and easy way for Americans abroad to file a tax return with the IRS. As we highlight in our regulatory filings, the paperwork burden posed by numerous international forms remains disproportionate. This will make the overseas filing experience less terrible, but it will remain undeniable that the overall tax problem remains.