AndyMan74

Hello to everyone and be gentle this is my very first post.

Ok a quick history and then my problem....if it is indeed a problem. I lived in the states from 1988(13 years old)-1999 (25 years old) and became a Dual citizen towards the end of my stay. I have now been living in the UK since then and married. I have filed a tax return on and off over the years but not every year but my income has never even come close the taxable threshold.

My question is if I return to the US to live am I going to have the IRS banging on my door due to the FATCA law or from not filing every year

many thanks in advance.

theOAP

Hello Andy, and welcome to BE.

If you return to the US, FATCA itself will play no part in your situation unless you retain assets in the UK with a yearly value of over $50,000 (filing married separate, or $100,000 married filing joint).

When you speak of the "taxable" threshold, I assume you mean the $4,000 (MFS for 2015, or other for MFJ) threshold. Since you are a USC, you do not have to file if your yearly income is below this threshold (or the appropriate threshold for past years which will be less). If your yearly income was above this threshold, then a tax return is required. Don't be mislead by the FEIE threshold of roughly $100,000 (for 2015 for example). In order to claim that exemption, you must file a return. Otherwise, you do not have the exemption.

AndyMan74

Thank you for your swift reply theOAP.

Sorry when I said the threshold I was talking about the upper limit where you have to start paying tax...I think its over $70,000 or is it $250,000 which i have never come close to.

There have been a few years where I have been well above $4000 and not filed a tax return (A 1080EZ and Foreign Income form). Can I back date those and fill forms in for the missing years? If i went stateside without doing the back dating would there be any problems?

Thanks again.

Note: I know quite a lot of US citizens who live in the UK who don't do any tax forms or know anything about FATCA....yikes!

theOAP

I was afraid that might be your reply.

The old $70,000 threshold you mention is the same FEIE threshold, now at roughly $100,000, that I referred to in my first post. Earned income below the $100,000 will not be taxed, BUT, in order to claim that exemption, you must file a 1040 tax return every year and include form 2555. Otherwise, the IRS will say you haven't filed as required and you will owe tax on that income.

It's only worth considering the last 3 years. If you have not filed for those 3 years, the IRS has special programmes that allow you to make amends.

As regards, "will I have a problem if I return to the US", possibly not, but can you be sure? Who knows.

The one issue which will arise is if you wish to apply for a spousal visa for your wife for the US. You may need to show past tax returns when applying if you are sponsoring her. I'll leave it to those much more knowledgeable BE people on immigration to advise you on that.

Yep, and we're trying to do everything we can to alert those people who are permanently resident abroad about FATCA (which is 100% more than the IRS or US Govt. is doing to alert them). It's disturbing to hear the stories about people who only learn from their bank that they should have been filing.

AndyMan74

Hello the OAP,

So are you saying that if I returned to the US the IRS would want tax paid on $100,00 for each tax year I didn't file???? My god that would be 10's of thousands of dollars.

I don't see how they would even know without doing an audit or something + could I not just say during those years I had no income...they cant prove otherwise.

The reason my tax returns stopped was that they use to send a booklet,forms and even a nice sticker for return post but that stopped.

Thanks again.

theOAP

First of all, don't panic.

There is a way to make amends and get you back within the good graces of the IRS. There is a programme called the Streamlined Foreign Offshore Procedures for someone in your situation. If you utilise this programme, you should owe no or minimal tax, depending on your income sources and amounts. Pay particular attention to the types of savings, investments, and pensions you may have. Details and how to proceed can be found here:

https://www.irs.gov/Individuals/Inte...-United-States

My first comment would be to tackle this while you are still abroad. There is also a similar Domestic programme for those resident in the US, but it comes with an automatic 5% penalty. For those engaging in the Offshore programme, there are no penalties.

The Offshore procedure requires filing 3 past years of 1040 returns and 6 years of past FBARs (now FinCEN 114). From your comments, I'm assuming you have not filed for 2012, 2013, and 2014. The return for 2015 is not due yet, so at this time it does not count as a past year.

My main concern is the fact you appear to have filed from abroad in the past. Part of the Procedure is a statement that must be made. That statement is usually something like "I didn't know I had to file". What the IRS is looking for is an indication the person was not "wilfully" avoiding filing when they knew they were required to file. Since you've filed in the past, you obviously knew you were required to file. My suggestion (and this is an amateurs opinion only!) would be to complete the forms and then find a qualified US/UK tax professional to advise how you handle this form.

I do remember the IRS packs that would come through the letter box every April. They must have stopped those 6 or 8 years ago. You now have to go online to the IRS site and download all the forms and instructions. They are in a format that allows you to complete them on your computer. You may want to consider using the online tax packages, such as TurboTax or TaxAct, but don't file them until you've talked to an advisor.

The FBAR form is also filed on line these days. Here again, if you've filed an FBAR in the past from abroad, is the wilful problem. Information on filing can be found here:

https://www.irs.gov/Businesses/Small...-Accounts-FBAR

You may tell the IRS anything you chose regards your past earnings history, but be aware you file a return under a penalty of perjury. If the return is found to have been knowingly filed with false information, you open yourself up, in the worst case, to jail (gaol) time. Or, you may continue to ignore the filing, but if found out (and going to the States could well leave you open to discovery) the cost in terms of monetary penalties and assessments could be significantly higher. Significantly. It's your choice.

AndyMan74

Hello again,

I did file last year and am about to this year.I have records of filling my tax returns(1040EZ and 2555) from 1997 to 2010 then the gap till 2014.

I have to admit to not knowing what FBARs (now FinCEN 114) are?

i wouldn't go down the road of giving false information and to be honest I have never come close to having any amount of money that would be worth taxing (Oh woe is me).


What you say all makes sense and I do appreciate your thoughts on the matter.

theOAP

Your filing in 2014 does complicate matters.

Technically, you should have filed for the Streamlined programme then. Technically, as a result of filing for 2014 in 2015(?), you are ineligible to file for the Streamlined programme now.

You should contact a qualified US/UK tax professional in the UK to be certain of where you now stand. The normal SOL (Statute of Limitation) is 3 years. For years when no return was filed, and should have been, there is no SOL. In other words, the file for that year remains open forever.

You may find if you file this year and next, you may be OK provided there is never a reason to review the 11, 12, and 13 returns. Given your income range, it's unlikely there would be any reason for a review. It may be wise to avoid relocating back to the States until the 2016 (filed in 2017) return is filed. I really can offer no advice as to how you should proceed other than contacting a qualified professional.

There are valid reasons for not filing a return, such as income being below the roughly $4,000 threshold.

Regarding FBARs. If the aggregate (total) value of all foreign (UK) financial accounts (current account, savings account, ISAs, etc.) added together, calculated as the maximum amount in each account during the year, of each and every account you have signature authority over (including joint accounts and some types of pensions), with a resulting value totaling more than $10,000 (converted using the Treasury exchange rate of 31 December), you must file an FBAR. This is a scary form since the penalties for not filing can be $10,000 per account per year for the last 3 years. The penalties can total 150% of the maximum amounts.

If the aggregate value of all reportable accounts is under $10,000, you don't have to file the FBAR. If the aggregate value of the accounts is over $200,000 (including the value of pensions), you may have to additionally file informational form 8938. Form 8938 is a result of FATCA.

Having said all that, there is an easy way to avoid any penalty and become compliant provided you had no idea of the need to file an FBAR. Go to the Treasury site, download the FBAR (FinCIN 114) form. In the drop down box explaining why you are filing late, tick "I didn't know I had to file", complete and file the FBAR, and do that for each of the last 6 (? talk to the professional first) years. That's all there is to do, and hopefully you should be OK. There are no stories we are aware of where filing in this manner was not accepted.

AndyMan74

Thanks for all your great information and the time you took to reply.

I will take all this on board and try and contact someone who has a definitive answer. On the IRS site there is a number to ring for all foreign tax issues...not sure if they can help.

I don't think I would let this issues stop me from going but at the same time I'd like to make sure I'm good to go with the IRS. I thought filing for the 2014 tax year would help....silly me. But like I said I have no hidden accounts, stocks/shares or pension so I have nothing to hide.

Can you recommend a good UK/US tax professional?

Sounds like the FBAR is the route to go. So would I do this now instead of filling for any years before I moved back? Example 2015/2016 tax years.

theOAP

To be clear, filing an FBAR is in addition to filing a US tax return. They're two separate obligations. It's not an either/or situation. If you are required to file one or both, you must file one or both.

I've had another quick look at the information for the Streamlined programme, trying to establish if you could in fact still file the 3 missing years even after already filing for 2014. It's not clear. Along with the fact you've filed from abroad before, my guess is it would be best to contact a professional. You could pre-complete the forms before approaching them, and let them advise you as to how to proceed. Since you've filed before, you're certainly capable of doing the forms yourself.

Now that this thread is in the USA forum, perhaps others will have some opinions.

This isn't something that could be put off indefinitely, but you do have some time to figure out how you want to approach this. You may decide to simply keep filing as you are now (but add the FBAR if you meet the threshold) until you have 4 or 5 years worth of returns, and then chance your luck.

The following are good (and you need someone good), but they will be a bit expensive. Certainly Liz at BritishAmerican and Frank Hirth will be expensive. Perhaps they could direct you to a less pricey office. You do need to talk to someone with US expertise, and not any ordinary British CPA.

American Tax Returns - US and UK Tax Experts Tel: 020 8946 0523

Welcome to British American Tax - British American Tax

Frank Hirth | Transatlantic Tax and Accounting

David, at American Tax Returns, may in fact come across this thread. All the above are in London.