Abroad in America

5 Costly Tax Mistakes Expats Make in Their First 2 Years in the U.S.

• Jimmy Miller

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Moving to the United States can open the door to incredible opportunities—but it can also introduce a level of tax complexity many expats never expect.

In this episode of Abroad in America, Jimmy Miller steps back from individual tax rules and looks at the bigger picture: the most common mistakes expats make during their first two years living and working in the U.S.

Many newcomers assume the American tax system works like the one in their home country. Unfortunately, that assumption alone can lead to major reporting issues, missed filings, and costly surprises later.

Jimmy breaks down five patterns he sees repeatedly—from misunderstanding worldwide taxation and leaving foreign accounts unchanged, to hiring the wrong tax preparer or ignoring reporting requirements because nothing seems to happen.

He also explains why certain financial decisions that look smart in the short term—like contributing to traditional tax-deferred accounts—can create problems for expats who eventually plan to leave the U.S.

If you’re new to the United States or planning a move, this episode will help you understand the rules earlier, reduce stress, and avoid expensive mistakes.

In this episode you’ll learn:

• Why the U.S. taxes worldwide income once you become a tax resident
 • How foreign accounts and investments can create reporting obligations
 • Why many expats accidentally hire the wrong tax preparer
 • The hidden risks of traditional 401(k) accounts for people who may leave the U.S.
 • Why “no IRS letters” doesn’t always mean you’re compliant

Living abroad—especially in the United States—comes with challenges. But with the right awareness, you can avoid the most common pitfalls and focus on the opportunities that brought you here in the first place.

SPEAKER_00

Welcome to the Abroad in America Podcast, the only financial podcast designed specifically for expats living in America. Where you go behind the scenes with financial planner, author, and speaker Jimmy Miller to learn how to make your time in America as financially rewarding. And now here's your host, Jimmy Miller.

SPEAKER_01

Hey everyone. Welcome back to Abroad in America. I'm your host, Jimmy Miller. Today's episode is a little different. Instead of diving deep into one rule or one form, we're going to zoom out and talk about patterns, specifically the biggest mistakes expats make in their first two years living and working here in the United States. And if you're listening to this and thinking, oh no, what have I already messed up? Don't worry, that reaction alone means you're doing better than most. Now, mistake number one, assuming the U.S. tax system is similar to your home country's tax system, this one causes almost everything else. Many expats assume that taxes are territorial and only U.S. income is taxed, and that foreign accounts don't matter unless money moves. And unfortunately, none of that is true. The U.S. tax is based on status, not location. Once you're a US tax resident, your worldwide income and assets matter. There's the F bars, there's the P fix, there's FATCA, and foreign pensions. They all matter here. And while this isn't obvious and nobody explains it at immigration, unfortunately, but that's why you're listening to the show, I guess. So mistake number two, keeping everything as is back home. A lot of expats arrive thinking, I'll deal with my home country finances later. They keep old investment accounts back home, they keep old foreign mutual funds, they keep joint accounts with their parents, and they even keep retirement plans they don't fully understand. Then two years later, they discover those normal accounts back home have turned into reporting nightmares here in the US. Doing nothing about it feels safe, but in the US it often creates problems for you down the road. Now, mistake number three is using the wrong tax preparer, and this is a big one. Not all CPAs and tax preparers understand expats, and not all expat tax preparers understand your home country. Many people accidentally hire a local CPA who's never filed an FBAR or Form 8938 before, or a cheap online service that ignores foreign assets, or someone who says, uh, don't worry about that, without explaining why. Unfortunately, I see this all the time. In US international tax, confidence without nuance is dangerous. The other common mistake I see CPAs and tax repairers make is recommending tax-deferred investment accounts here in the US for expats that don't plan on living here forever. The most common one is the 401k at your workplace. Because the tax preparer usually only has one goal for their clients, which is to get them back as much money from the IRS this year as possible, they often recommend these types of accounts. This is because in the short run, like this year, those types of accounts do save you some money on what you may owe the IRS, but they don't really save you that money. They just put it off till later. You have to still pay that tax just later. And while that can be a good choice for an American who is likely going to remain in America for their entire life, it probably isn't the best choice for you if you might one day leave America and return to your home country. This is because when you leave, you naturally want to take your money with you. And if that money is in a pre-tax retirement account here in America, like your traditional 401k at your workplace, and you try to take it home with you before you're 59 and a half years old, the IRS is not only gonna take its taxes from that money, it's going to take tax on all the growth of that money as well. And to add insult to injury, the IRS is gonna add an additional 10% early withdrawal penalty tax on top of the regular tax for taking it with you. Ouch, that really hurts when it's all added up. The best way around that problem, which we're gonna discuss in great detail in an upcoming episode, is to use Roth accounts to save any retirement money you want to save while you're here in America. So instead of signing up for the regular traditional 401k at your workplace, you probably want to sign up for and put your money into the Roth 401k plan at work. Now, this won't save you any tax money now, but it will save you a lot when you want to take your money with you one day, I promise. So stay tuned for more information about this issue in an upcoming episode. The fourth mistake is ignoring paperwork because nothing happened. This is the silent mistake. No letters, no penalties, no scary notices. So expats assume I guess it's fine. But many US international reporting rules don't trigger immediate consequences. They just sit there, waiting until you sell something, or you move, or you apply for a green card, or you get audited years later. Silence does not mean compliance. And mistake number five is understanding how different America really is. And this isn't just financial, it's cultural, professional, and emotional. You know, there's health care and access to it here, credit scores and why they can be so important if you want to stay longer term. This at-will employment where you can just get fired anytime from work if your employer wants to get rid of you. Networking with the crazy, apologetic, and enthusiastic culture that abounds here, self-promotion so you can actually get ahead, and litigation fear because everyone in America can sue everyone else in a court if they want to. Many expats struggle not because they're unprepared, but because they assume that things will eventually feel familiar on their own. But in the US, learning is active. You ask, you research, and you adapt. And once you do, things get easier fast. The good news is that almost every expat makes at least one of these mistakes. Some make all of them. And most still end up just fine. The goal here isn't perfection, it's awareness. If you understand the rules earlier, you reduce your stress, you save money, you avoid surprises, and you enjoy your time in the US a lot more. Here's a final thought. Living abroad is hard. Living abroad in the US is uniquely complicated. But you didn't come here because it was going to be easy. You came for an opportunity for growth and experiences. And the fact that you're listening to this podcast tells me you're doing better than you think. That's it for today's episode of Abroad in America. If you found this episode relatable, share it with another expat. They'll probably say, Oh wow, I did that too. And until next time, stay curious, stay adaptable, and as always, keep exploring.

SPEAKER_00

Want even more ideas, tools, and resources on how to navigate your financial life as an expert in America? Check out all the resources on Jimmy's website at bayobwealthabroad.com. And subscribe to the blog to stay up to date on agents affecting experts. Don't forget to subscribe to never miss an episode. See you next time. Bayob Wealth and Bayob Wealth Abroad, a DBAs of Bayob Wealth LLC, a Florida registered investment advisor. This podcast is designed for general education purposes only and shouldn't be taken as legal investment or tax advice. You should seek out a qualified tax professional or licensed financial advisor to determine what is best for your personal situation.