You set up a one-person company in Hong Kong, the U.K., or Taiwan to run your consulting work or hold a property. Someone told you it is "disregarded" for U.S. tax purposes, so the income just flows onto your return. That part may be true. What is often missed is that a disregarded foreign entity comes with its own information return, Form 8858, and a $10,000 penalty for each year it is not filed.

You worked abroad, paid tax to a foreign country, and claimed the federal foreign tax credit. Your federal tax on that income dropped to zero. Then your state return arrived with a bill.

Learn how timing income and deductions across borders can optimize U.S. and foreign tax outcomes for expats, remote workers, and global entrepreneurs.

Navigating U.S. tax obligations while living abroad can be challenging, but taking proactive steps now can lead to significant tax savings.