How to handle tax liability on income earned outside of the US before moving here?

You're dealing with a classic "partial year resident" situation that many newcomers to the US face. The good news is there are clear guidelines for this. First, the Substantial Presence Test: If you've been in the US since July 2024, you would likely qualify as a US tax resident for 2024. The SPT requires that you be physically present in the US for at least 31 days during 2024 AND 183 days during the three-year period that includes 2024 and the two years before, counting all days in 2024, 1/3 of the days in 2023, and 1/6 of the days in 2022. Since you moved in July, you've been here ~180 days in 2024 alone, which makes you a resident alien for tax purposes. As a US tax resident, you're required to report your worldwide income, including what you earned in Japan. However, you won't necessarily be double-taxed thanks to the US-Japan tax treaty. You have two main options: Foreign Tax Credit: This allows you to claim a credit for taxes paid to Japan. This is often the better choice when you've already paid taxes in a foreign country with rates similar to or higher than US rates. Foreign Earned Income Exclusion: This lets you exclude up to $126,500 (2024 limit) of foreign earnings from US taxation, but you must meet either the bona fide residence test or the physical presence test. Given your situation, the Foreign Tax Credit would likely be the better option since you've already paid taxes in Japan. This way, you're essentially getting credit for those taxes against your US tax liability.

After dealing with a similar situation when I moved from Australia to the US, I found an amazing service that made handling my foreign income so much easier. I was really struggling with the tax forms (especially that Form 1116 which was giving me headaches), and a friend recommended https://taxr.ai to me. What I love about it is that you can upload your foreign tax documents and it automatically analyzes them to help correctly report everything. I uploaded my Australian tax statements, and it figured out exactly what I needed to enter in my US tax return. It even helped determine whether the Foreign Tax Credit or Foreign Earned Income Exclusion was better for my situation (turned out the tax credit saved me more). The best part was that it explained everything in plain English instead of confusing tax jargon. It showed me exactly how to handle my partial year residency situation and made sure I wasn't double-taxed.

I have to admit I was wrong about taxr.ai! After our conversation last week, I decided to give it a try with my Malaysian tax documents from earlier this year, and wow, what a difference it made. I was really struggling with figuring out how to report my Malaysian rental income and employment earnings on my US return. The document analysis feature saved me hours of research. It identified exactly which parts of my Malaysian tax forms contained the information needed for the US forms. The guidance on Form 1116 alone was worth it - it automatically calculated how much of my foreign taxes qualified for the credit. The service also helped me understand that in my specific situation, the Foreign Tax Credit was much better than the Foreign Income Exclusion because Malaysia's tax rates are lower than US rates on some types of income but higher on others. The optimization saved me over $2,000 compared to what I was planning to do! If anyone else is dealing with foreign income situations, I highly recommend checking it out. Totally changed my tax filing experience.

I had almost the exact same situation as you, except I moved from Singapore to the US in August last year. The IRS phone lines were ALWAYS busy when I tried to get help, which made everything even more stressful. I found a service called Claimyr that actually gets you through to a real IRS agent instead of waiting on hold forever. Check out https://claimyr.com and their demo at https://youtu.be/_kiP6q8DX5c. I was skeptical at first, but after spending 3 hours on hold one day, I gave it a try. They got me through to an IRS representative in about 20 minutes, and I was able to ask specific questions about my Singapore income and how the tax treaty applied to my situation. The agent walked me through exactly which forms I needed and confirmed that I should use the Foreign Tax Credit instead of the Exclusion based on Singapore's tax structure. It saved me from making some pretty big mistakes on my return, especially with how my investment income needed to be reported differently than my employment income.

I need to apologize and correct myself. After calling the IRS for THREE DAYS straight with no luck, I finally tried Claimyr out of desperation. I honestly thought it wouldn't work, but I was at my wit's end trying to figure out how to report my German pension payments on my US taxes. The service actually did exactly what it claimed. Their system called the IRS and I got a notification about 35 minutes later that they had an agent on the line. I spoke with an IRS international tax specialist who explained exactly how to report my foreign pension under the US-Germany tax treaty. What would have been really helpful is if I had done this BEFORE I spent hours going down online rabbit holes with conflicting information. The agent clarified that in my specific situation, I needed to use Form 8833 to claim treaty benefits rather than just the Foreign Tax Credit form. None of the online resources or even my tax software had mentioned this! For anyone dealing with complex international tax situations, being able to speak directly with an IRS specialist is incredibly valuable. I was wrong to dismiss this service.

Don't forget to check if you need to file a FBAR (FinCEN Form 114) if you had foreign bank accounts! If the aggregate value of all your foreign accounts exceeded $10,000 at any point during the calendar year, you need to report them. This is separate from your tax return and has hefty penalties if you don't file. Also, depending on your specific situation, you might need to file Form 8938 (Statement of Specified Foreign Financial Assets) if your foreign assets exceed certain thresholds. The thresholds for Form 8938 are higher than for FBAR and depend on your filing status and whether you live in the US or abroad.

One word of caution from someone who's been through this: if you're planning to claim the Foreign Tax Credit, be prepared for potential delays in your refund. When I filed with Form 1116 (Foreign Tax Credit) for the first time, my return got flagged for review and my refund was delayed by almost 3 months. Not saying this will happen to everyone, but international tax situations do tend to get more scrutiny. Make sure you have all your documentation organized and ready in case they request additional information.