I am an expat of 20 years. It is15 years since I have filed a tax return. I have never made enough money to be taxed. How do I proceed from overseas?
Contrary to popular belief among expats, the obligation to file U.S. taxes does not end when you take up residence in a new country, even if you don’t ultimately owe taxes on your income. For more on expat tax myths debunked - see our article: Note to Expats: No, You Didn't Dodge the U.S. Tax Bullet.Therefore, in brief, assuming that your failure to file all of these years was non-willful (for example, you received bad advice in the past or otherwise had a good reason to think you had no filing obligation), your best bet is to enter into the IRS’s amnesty program called the Streamlined Foreign Offshore Procedures. Under the current Streamlined program, you’d be required to file the prior 3 years of tax returns and 6 years of FBARs and fill out a certification of non-willfulness. A taxpayer who complies with these procedures does have to fork over previously unpaid taxes with interest, but is not subject to penalties • a great deal for taxpayers who would otherwise be subject to potentially enormous penalties for non-compliance. In your case, this would work particularly well if you owe no back taxes (for example, due to the fact that your annual income falls below the foreign earned income exclusion threshold).The IRS amnesty programs have become quite popular for people in your situation. More than 100,000 disclosures have been processed from taxpayers around the world. When speaking recently about this program, however, IRS Commissioner John Koskinen suggested that the program will eventually be closed once the IRS determines that there’s no way a taxpayer who would want to participate couldn’t have heard about the process (rendering the taxpayer willfully delinquent by default) • so you should consider entering the program sooner rather than later.In theory, there are other potential options available to you, such as: (1) “Noisy” Disclosure (filing past delinquent returns with a statement explaining the reasons for the delinquency), (2) “Quiet” Disclosure (filing past delinquent returns without any statement of explanation), and (3) Prospective Filing (ignoring past delinquencies and complying only with respect to tax years moving forward).However, we do not recommend the above alternative approaches for a number of reasons. First, the IRS frowns upon attempts by taxpayers to circumvent the programs specifically designed to benefit delinquent taxpayers. Second, the outcomes associated with the alternative approaches can vary so greatly and can potentially lead to disastrous results. Third, we have yet to encounter a situation that justifies the risks associated with these approaches in contrast to the IRS amnesty programs, which offer the taxpayer certainty and a clean record moving forward.For more information and an in-depth analysis of solutions that we offer for delinquent taxpayers, you’re welcome to visit our website: www.expattaxprofessionals.com.