Streamlined Procedure for US expat late in working career

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Streamlined Procedure for US expat late in working career


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Old 20th January 2019, 06:27 PM
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Default Streamlined Procedure for US expat late in working career

Hi - I am the Scottish husband of a US citizen who has lived in the UK for 29 years.
My wife has had a modest income for the past 15 years - between 4000 and 6000 - and for the last 5 years has had a self-employed status. We were not aware of the requirement to declare income, even at a low level ($400 for self employed people!) even for US citizens living abroad.
In 2018 my wife took her first full time job with with a charity, with an income of 24000 pa, and it was just after this we discovered the FBAR regulations and the tax requirements of the IRS. The job is likely to be only a 3 year appointment and, as she turns 60 next year, she is not looking to continue in full time employment.
Since we became aware of this, my wife has discovered that 2 people she knows, one in Canada and one in the UK, have both been fined by the IRS for non-compliance, both of whom have substantial incomes, bank accounts in the USA and maintain significant physical and financial presence there. My wife has no property or bank accounts in the USA. However, their situation has made her anxious and she thinks the only way forward is to use the Streamlined FCP and complete the 6 years of FBAR (we rarely - but just - have savings over $10000).
Clearly my wife has never been in a position of having to pay US taxes and the issue is purely about compliance.

So my uncertainty is this: Does she complete the tax process for the past 3 years, or just start filing for this past year when she started working full time? Or, given the small window of future employment, do we just do nothing? I have already created a separate bank account in my name only to keep our joint account under $10000, which I dislike doing, so could we complete the FBAR annually without needing to be tax compliant? Personally, I would be happy to ignore what seems to me a ridiculous system for US citizens who have long left the shores of America. However, my wife is more conscientious and rebellion doesn't sit easy with her! (And it is her personal circumstance, so I respect her view over mine)

Clearly, the decision is ours to make, but any advice would be really helpful.

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Old 20th January 2019, 07:52 PM
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Hi!

I've moved your thread over to the Expat Tax branch as you're more likely to get an informed response to your situation here than in the UK branch.

Good luck to you!

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Old 20th January 2019, 08:20 PM
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First thing is.... don't panic. Your wife is far from the first person to find themselves in this situation, and probably far from the last either.

If she wants to get compliant, she should go for the Streamlined Compliance thing. Usually the best way to go is to first file the current year (i.e. 2018) and then do the 3 prior years, marking them up for the Streamlined program per the instructions. The current year can be done on its own first, and then the back filings have to be mailed in together to a special address.

She should probably file as "married, filing separately" (in order to keep it to just her income and not get you involved in the process). If she's working in a paid job, then she can take the Foreign Earned Income Exclusion, which eliminates taxes on her earned income (i.e. salary income). Any bank interest or other "unearned" income in her name will probably fall under the standard deduction, so in the end, no taxes due.

The one trick is that this year's tax forms have changed (for the better - quite a bit shorter and simpler). It's the back filings that get a little tricky, if only for the longer forms.

The FBAR/FinCEN report requires her to report the maximum balance for each year of each account in which she holds a signature interest. So, sure, split your joint account, however she'll still have to report the joint account held in past years.

The fact that she has no US financial assets makes it much less likely that the IRS will ever bother her - and in fact, she could probably just continue to stay under the radar. For salary and other foreign income there isn't a cross-border reporting mechanism, so the system really does rely on "self assessment" at the moment.

Up to her how she wants to handle this. But in a straight-forward financial situation, the forms shouldn't be all that difficult for her to do herself. On the IRS website, look for Publication 54 for an overview of how filing from overseas is supposed to work.

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Old 21st January 2019, 05:56 PM
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I'll second what Bev said, if she has no US assets or income or other financial interests there is likely zero chance the IRS will ever become aware of her existence, let alone attempt to penalize her. They are not seeking out non-compliant US citizens abroad, and in fact would have no legal means to collect fines from her in the UK.

That being said, a couple of questions: (1) Does she have UK citizenship, or does she only have a US passport? If she's not a UK citizen then there's an argument to be made for treading a bit more carefully. (2) Are there any plans to return to the US (presumably not) or expectation of a US inheritance? (3) Are UK banks aware of her US citizenship or birthplace (possibly not if she's had the accounts for decades) and if so, are they likely to be reporting her under FATCA?

If she's a dual citizen with no interest in returning to the US, I'd continue ignoring her tax filing obligations. If she needs her US passport or thinks she might have been reported under FATCA, then there's a good argument for compliance. There would be nothing owed and the paperwork should be relatively simple.

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Old 7th February 2019, 05:28 AM
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Thanks for the advice. My wife is currently looking at UK citizenship and relinquishing her US citizenship solely on this issue, however both actions are not without substantial cost. She has no intentions of retuning to the USA on a permanent basis. It was, in fact, our online banking which alerted her to this whole situation as she she logged on a form popped up asking about citizenship - which she ignored at the time. As I didn't receive the same form when I logged on, we were unsure as to whether this inquiry was specific or a general banking information compliance process.
I appreciate the time both of you have taken to respond to my query - discovering this forum was a relief in the middle of a rather puzzling and anxious situation!

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Old 7th February 2019, 06:54 AM
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Not sure of the situation in the UK, but here in France, some banks are starting to send out a similar form to just about any customer (or potential customer) who is not a French citizen born in France. (A few Italian friends of mine have received similar forms/inquiries from their French banks.)

It shouldn't be absolutely necessary to renounce (especially given the exorbitant cost of doing so), but one factor to consider is whether the "income" that could/would potentially be reported from the banks would exceed the filing threshold in the US. The only income the IRS knows about is that which is reported to them - i.e. anything reported on a W-2, 1099 or "implied income" based on any bank balances being reported under FATCA.

Taking UK nationality is probably a good idea, no matter what. But it may not be necessary to renounce to stay comfortably below the IRS radar.

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Old 13th November 2019, 05:13 AM
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The IRS can only catch up with her and claim their due if she intends to acquire assets in the US or resettle there permanently. Otherwise it would be too costly to pursue her in a foreign land. Given that she’s turning 60 and does not intend to continue with employment, her situation is in her favor.
If she chooses to comply though, the streamlined program is actually is availed to all American expats who haven’t been filing because they weren’t aware that they were required to and who have missed at least 3 years of US tax filing. Those expats who are 1 or 2 years behind with filing only need to back file their overdue returns. The streamlined procedure has a number of advantages; it helps you prove that your non-compliance was non-willful, given that most US expats are trying to hide their foreign assets. It also helps you claim one or more tax exemptions.

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Old 13th November 2019, 02:31 PM
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Sydnecl -- Your statement "...given that most US expats are trying to hide their foreign assets" is pure conjecture and not substantiated by fact. I will concede that the FATCA abortion was developed to support your and Carl Levin's false narrative -- but this bill was never passed in it's own right, but slipped into an appropriations bill. Carl Levin tried to pass this bill, for a decade, before he and his croneies got sneaky and snuck it into a bill that needed to pass. FATCA has been a headache to many expats, trying to live their lives freely, overseas. In fact, I read an article last week (I have no idea about the veracity of the authors research) that enumerated that the U.S. government spends $2,000 USD for every dollar it collects in compliance to administer this law. Cheers, 255

P.S. Otherwise your guidance to the OP was spot on and despite this tread being nearly a year old, is still good input.


Last edited by 255; 13th November 2019 at 02:38 PM.
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