IRS Amnesty for Expat U.S. Citizens - Is the end approaching?

Feel free to ask me any questions here, I'll be glad to help all that I can.  I've been working with Expats for 33 years.

Why not just do your taxes on time?

Hi Hailey,
    What I find is that its not a disregard for filing, its a "I didn't know I needed to file".  In almost every other country, if you are out of the country living and earning a living, then your home country doesn't make you file and report.
    However, the United States is one of the few countries (and you can count them on one hand and have fingers left) that makes their citizens file taxes (Form 1040) each year no matter where they live or work.  In addition, the IRS makes each taxpayer file the FBAR form if you have over $10,000 at any one time in banks, brokerage houses and pensions outside of the U.S.  There is no tax due on the FBAR, its just informational in nature.  However, if you have money and its not reported, the IRS has been able to levy penalties of as much as 50% of the amount in the accounts not reported.  There was a famous case just last year where a U.S. Citizen inherited $42,000,000 from her husband (a non-U.S. Citizen) that was kept in banks in Liechtenstein.  She did not report the accounts on her FBAR filing and the IRS, through the FATCA treaty with many foreign governments, found out about the deposits.  She had to pay a penalty of $21,000,000 for not reporting the balances.  All she had to do was file the FBAR reporting the balances during the year and she could have saved herself that penalty.
     Most Americans, especially if they have been expats for years, are unaware of these requirements to maintain U.S. Citizenship and passports.  The burden of non-reporting is a heavy one and one which can be lifted by using this "amnesty" known as the "Streamlined Processing".  Then, each year, if they file the 1040 and the FBAR, they will be fully in compliance with U.S. law.

If US citizens are residents of countries abroad or are outside of the USA for like 330 days and file the correct paperwork you can get a sweet tax exemption.


See your friendly neighborhood tax attorney or CPA.

Eric,
   That is true!  $97,600 was the earned income exemption for 2012 returns.  However, most of the time, in countries with a higher tax rate than the U.S., it makes sense to use the Foreign Tax Credit (form 1116) instead due to the fact that the amount of credit not used for that year can be carried forward.  Also, the exemption is only for "Earned" income - not dividends, interest, capital gains, etc.
   Just wanted those U.S. Citizens who hadn't filed to understand that filings must be made, and for the current period there is an "amnesty" period where all penalties for not filing can be waived. 
   It is also my opinion that the item that the Department of the Treasury wants the most is the FBAR.  That is the emphasis of their "Streamlined Processing" amnesty (since 6 years of FBAR are required versus 3 years of the tax returns).  They are wanting a "roadmap" of where U.S. Citizens have their money invested overseas.   
   I'm not saying its correct, I'm just saying that its the way it is for the time being.

One of the many questions I get is, "Can I still file a tax return if I didn't file an extension?".  The quick answer is "YES! and you should!".   If a U.S. Citizen is out of the country on April 15, then you have an automatic extension until June 15.  On that date, you are supposed to file a written extension to get you until October 15.  However, if no tax is due, then no penalty for late filing will be assessed.  If your country of residence has a higher tax rate than the U.S. (and that is most of the countries of the world), then you won't owe any U.S. tax on your worldwide income.  However, as a U.S. Citizen, you still have to file the annual tax return.
The time to act is now - there is the amnesty period that allows you to get totally caught up now.  I urge you to consider getting the weight of non-filing off your shoulders - you'll be glad you did.

Kevin

The last due date for 2012 tax returns is coming up - October 15.  That is the customary filing date for U.S. Citizens living overseas.  You can request, but only in writing, a further extension to file until December 15, but these take much more "convincing".  Don't forget that the "amnesty" is still in force for those who haven't filed since before 2009.  We don't know when that will end, but it should be taken advantage of if you are way behind in filing.....3 years of tax returns (along with some additional information and forms) and you are caught up!

Hello Kevin,

I can't figure out whether this thread is about helping US expats or promoting your services - I prefer closing it.

Best,

Christine