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Discussion Starter · #1 ·
Hi - I need help !!

I'm an American, 51 years old, lived in UK since age 6, never had anything to do with US apart from a holiday last year. Looking on BBC web site today reading about Americans giving up their nationality due to FATCA. Researching this some more it seems that I have been meant to file tax returns to the US for the whole of my life up until now and that potentially financial institutions may start sending information about me to the US.

I cannot go back through the whole of my working life and provide all of the information they require, and I'm not going to pay a tax adviser to do this either.

Can anyone tell me what is likely to happen if I never do file a tax return ? Can they come after me in the UK ? I have no intention of living in the US although I might visit there.

The idea of giving up my US passport suddenly seems quite attractive as I will have no difficulty becoming naturalised British..

Thanks very much for any advice.
 

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You are hardly the first long-time overseas resident to run up against this issue. In the recent past, it has normally been adequate to file the current year's tax return plus three prior years. Provided these returns show little or no taxes due, that's usually enough to clear your record with the IRS as long as you go forward with proper filings. This process has been institutionalized a bit under an "amnesty" plan - but it's fairly clear that the formal amnesty is directed at those in income brackets where there may be some significant amounts of back taxes due.

You're allowed to "exclude" up to about $96K in earned income (using form 2555) under the Foreign Earned Income Exclusion - earned income is mostly salary or salary-like business earnings. Over and above that, there is a provision for taking credit against any US tax liability for foreign income taxes paid. Or the foreign tax credit can be used to cover both earned and unearned income without the "exclusion."

If your financial situation is relatively straightforward, you can make use of the various tax preparation software programs - generally available online, though there may be a fee for their use and/or for doing an e-filing. (A few free-filing sites are available, but check for the income, age and other restrictions on their use.)

No one is quite sure what will happen if you simply lay low and stay completely off the US tax radar. It used to be quite easy to do, but with this FATCA and FBAR legislation that attempts to obligate foreign banks to report on "US persons" it's difficult to know just how many banks will actually comply and in what manner. (And actually, it's impossible to say what, if anything, the IRS will be able to do with the information they receive from the foreign banks.)
Cheers,
Bev
 

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Discussion Starter · #3 ·
Hi Bev -

Thanks for your fantastically reassuring reply. It sounds like even if I go "legal" I won't be liable for anything apart from a fair amount of time invested in sorting this out.

My inclination is to not do anything for the moment and see how the situation pans out. Thinking about it more now that I've calmed down, I can't see how the US tax people can do anything even if they did get passed my financial data and it showed I needed to give them something. If I went back to live in the US I guess it would be a different matter.

Again, probably completely overreacting, but if they thought I owed them money, do you think they could stop me if I tried to enter the US ?

cheers
 

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Again, probably completely overreacting, but if they thought I owed them money, do you think they could stop me if I tried to enter the US ?
Officially, the IRS is not supposed to share records with the USCIS (i.e. the border control folks), though they like to keep that sufficiently "ambiguous" so as to scare folks into compliance if they are planning on traveling to the US.

I suppose it would depend on how the IRS might "think" you owe them taxes. If you've filed, gotten notifications of issues and not complied with their deadlines to respond, then it's possible they'd have a warrant out for you that could be served as you entered the country.

But there are loads of very legitimate reasons why you just haven't filed for a number of years. (Primarily, insufficient income.) They aren't going to stop you at the border simply because they don't have a tax return on file for you.
Cheers,
Bev
 

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Discussion Starter · #5 ·
Thanks again, that sounds reasonable.

My hope is that they will change this antiquated rationale for trying to collect taxes from non US residents at some stage in the future. Looking into this more, it seems there are campaigns for them to do this, notably see American Citizens Abroad web site.
 

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There have been campaigns to try and change the tax laws for a LONG time - not only the ACA but also other US expat groups. Usually, the tax attorneys who are members of the respective groups discourage the groups from lobbying Congress on this "lost cause." On the one hand, they're probably right - of all the issues confronting Congress, fair treatment for overseas residents is WAY down the list. On the other hand, one does wonder at the conflict of interest for such "advice" coming from the overseas tax attorneys...
Cheers,
Bev
 
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