March 24

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Are You a U.S. Citizen Abroad Who’s Never Filed Tax Returns?

By Brett Farmiloe

March 24, 2021

As a US citizen moving abroad, there are numerous steps you’ll take during your move—from visa requirements to choosing between renting or buying your new home. Nevertheless, one aspect that many US citizens living abroad don’t consider is tax returns.

If you’re a US citizen living abroad and you’ve never filed a tax return, you aren’t alone. The most common reason thousands of expats don’t file taxes each year is this: they didn’t know they had to.

Whether you’re planning to move abroad or have for years, tax planning should be a significant part of your move preparation. If you were unaware that you had to file taxes as a US citizen despite living abroad, you might wonder: should I still file? How can I become compliant?

This article examines what it means to be a US citizen abroad who has never filed a tax return. Keep reading to learn about possible penalties and what to do to become compliant.

Penalties For US Citizen Abroad Never Filing a Tax Return

Regardless of where you live as a US citizen, there are two common penalties to know about: failure to file and failure to pay.

Failure to File Penalties

An individual can receive a failure to file penalty if they do not file their tax return by the due date. This due date can be the default date of April 15 or an extended due date if an extension file has been approved.

It is important to note that US citizens living abroad have a different due date than citizens living in the US. US citizens living abroad are given an automatic two-month extension to file their tax return. Thus, a penalty for not filing would apply after this extended due date.

Failure to Pay Penalties

Let’s say you did file your tax return, but you failed to pay what was reported. When failing to pay the taxes indicated on your tax return by the due date, you receive a failure to pay penalty. Furthermore, you can receive a penalty for not paying enough taxes by the required due date.

How to Become Tax Compliant as a US Citizen Abroad

When to File Past Due Tax Returns

Filing past-due returns is the quickest way to comply with US tax standards as a US citizen living abroad.

Let’s say you have lived abroad for two years. In that time, you didn’t file tax returns because you were unaware you had to. In this scenario, you can catch up on these tax returns by filing past due tax returns. This is similar to back-filing taxes as a US citizen living in the United States. But as an expat you should consult an expat tax expert before filing or contacting the IRS.

Another thing to note when filing taxes abroad are foreign financial assets. Due to the Foreign Account Tax Compliance Act (FACTA), all US citizens with foreign assets must report them using the FBAR form when filing a tax return. This is done by filing FinCEN Form 114, known as the FBAR, with the U.S. Department of Treasury along with Form 1040 tax return.

Streamlined Filing Compliance Procedures

If you are a US citizen abroad who hasn’t filed a tax return for more than three years, you can become compliant with the streamlined filing compliance procedures. The purpose of these streamlined procedures is to allow taxpayers to resolve penalties for filing delinquent tax returns.

To be eligible for these streamlined procedures, an individual taxpayer must certify that their failure to file tax returns was not willful. The IRS defines non-willful conduct as the following:

“Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”

If eligible, you will be required to file a correct tax return or work with the IRS in discovering your correct tax liability. Then, you will be required to pay the full amount due on your tax returns. If you cannot make a full payment, you will be required to make arrangements to pay this amount over time.

Trust Your Taxes With the Experts at Tax Law Expats

As a US citizen abroad who has never filed taxes, the idea of filing your tax returns can seem daunting. Without a comprehensive understanding of how to file your taxes, you can unknowingly make mistakes and omissions when filing. Thus, you run the risk of triggering filing penalties, IRS audits, and more.

The best way to file your tax returns abroad is by contacting the professional tax experts at Tax Law Expats. What makes working with Tax Law Expats beneficial is you can consult a tax attorney. By speaking to a tax attorney first, you establish client privilege, unlike a CPA or EA.

In addition, Tax Law Expats provides all services of our expert tax law attorneys, CPAs, and EAs under one roof. You’ll receive accurate professional tax advice and expertise backed by over 25 years of expat tax experience.

Are you in need of professional expat tax advice?
Schedule a confidential consultation with Tax Law Expats by calling (305) 600-5924 or visiting us online.

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