Did your worldly travels lead you to live life abroad? Take a look here for more information on how to file and pay U.S. taxes.
Did you know that all U.S. citizens and Green Card holders must file a U.S. tax return and pay U.S. Federal (and possibly State) taxes? It’s true, and applies to those in special cases as well:
- Even if you have not lived in the U.S. in years
- Even if you have moved permanently and have no intention of returning to the U.S.
- Even if you did not earn anything in the U.S.
The exception
Only if you have less than the following applicable gross income amount in 2019 (based on your age and filing status), do you not need to file a tax return:
Under 65 years old:
| Filing Status | Gross Income |
| Single | $10,400 |
| Head of Household | $13,400 |
| Qualifying Widow(er) | $16,750 |
| Married filing jointly | $20,800 |
| Married filing jointly, not living together at end of year | $4,050 |
| Married filing separately | $4,050 |
65 years or older:
| Filing Status | Gross Income |
| Single | $11,950 |
| Head of Household | $14,950 |
| Qualifying Widow(er) | $18,000 |
| Married filing jointly: [See Below] | |
| One spouse over 65 | $22,050 |
| Both spouses over 65 | $23,300 |
| Married filing separately | $4,050 |
Ripple effects
Consider a few examples on the ripple effects that not filing and paying US taxes may have:
- The IRS sends you a letter claiming you are delinquent in filing and paying taxes. They assess significant interest and penalties. There is no statute of limitation on unfiled tax returns.
- You are a US expat and get married to a non-U.S. citizen in the country you currently reside. If you are delinquent on filing your Federal tax returns, your spouse may have trouble obtaining a US visa. To obtain a US visa for your spouse, you must submit copies of US tax returns for the last 3 years.
- After living abroad (and not filing tax returns) for years, you switch jobs and decide to come back to the US. What do you tell the IRS once you begin filing again? How will you remain in good tax standing and avoid being flagged by the IRS in the future? Look at it from the perspective of the IRS, there is no record of how you earned money or where you have been employed.
- Your hard work paid off and you have done well for yourself while abroad. If you intend to use a US bank or a brokerage account, you may experience difficulties. How do you demonstrate where the funds came from without a tax return detailing their origin?
- You would like to return to the US and buy a home. How do you prove where the money came from? Will the government question whether it was obtained legally?
- Your child is ready for college and they would like to study in the US. If your child intends to access financial aid or scholarships, they will need a copy of your tax return.
Why is it a problem now?
Over the last few years, the U.S. implemented a law (FATCA) requiring that foreign financial institutions report bank and other financial accounts of US citizens and “green card” holders to the IRS. Therefore, the IRS is increasingly able to spot overseas assets of US citizens and “green card” holders.
Currently, the IRS has made available several tax amnesty programs that can help those that are delinquent in filing. However, they have announced that one of the key amnesty programs will expire later this year. The legal costs, interest and penalties are likely to be much more severe in the future.
State Tax Returns
In addition to US Federal tax returns and taxes, many States assert the right to tax people that previously lived in their State and did not move to another State. Seek advice on whether you may have a continuing obligation to file tax returns and pay State taxes in the last State you lived in.
For more information on any tax concerns please log into our webpage, write us at info@lagattatax.com or call at (51) 949-968-555. All consultations are free and confidential.
Cover image: Pixabay
This article has been updated from its original version published May 24, 2018.
