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Hi All,

I had a look through the forum but didn't exactly find an answer.

I am a dual national between Australia and USA.

Basically I was born and grew up in Australia, my Mum is American and when I was born she applied for a USA passport for me, as she thought it would be a useful thing to have in the future.
As a child I held both a Australian and American passport but I no longer have an active American passport.

I have never lived or worked in America.

I am 30 now and I am trying to work out if I should have been doing both Australian and American tax all this time?

Any advice would be great.

Thanks
 

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Theoretically, yes, you should be filing US tax returns for any year that your worldwide income exceeds the filing thresholds. (Filing thresholds depend on your age and family status - i.e. married, single, head of household, etc.)

The IRS website has a little questionnaire that will tell you if you should file or not: Do You Need to File a Federal Income Tax Return?

Click on the yes or no at the bottom of the page as appropriate and it will take you to the next question.

Practically speaking, if you owe no US taxes, you have no particularly large financial investments (say, no more than $200,000) and you aren't planning on moving to the US in the near future, you can probably continue to fly under the radar until you have reason to get square with the US IRS. You're unlikely to owe any back taxes if most of your income is from salary and your salary income is less than about $100,000.

The usual procedure if and when you do want to take advantage of your US citizenship in some way is to file four years of back taxes (six, if you have significant investments and fall under the FATCA requirements) to demonstrate that you owe no back taxes. The FATCA stuff is fairly new, though, and it's not certain how aggressively the IRS is going to pursue compliance, particularly for those resident outside the US.
Cheers,
Bev
 

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There is nothing "theoretic" about it....

I am surprised at this answer and the tone which seems to say, no biggy, don't worry about your US filing you probably won't have a problem.

If you have ever held a US passport, if you were born in the US, if your parents were American, you MUST keep up to date on your US filing requirements.

I say filing, and not taxes, because indeed there is a pretty good chance you may not owe any US taxes.

However if you have ever had a bank account balance over 10,000$ on ANY account over which you have signing power (even if it is not your money), you are subject to penalties of minimum 10,000$ per account per year simply for not informing the treasury department of these accounts.

You must file a FBAR every year you have signing power over 10,000$ on an account outside of the US or you could have your entire savings confiscated by the IRS.

This is not something to take lightly or nonchalantly.

Others will perhaps tell you "don't worry, no biggy, they are not going after people like you".

I can tell you that there are hundreds of thousands of people that ARE worrying, that are spending thousands of dollars to come into compliance and understand the situation, and who are facing sleepless nights over this situation.

Welcome to the club.
 

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OK, put it another way - legally you are supposed to file. And, yes, there are those awful penalties if you get caught not filing when you should have done so. There are also thousands of folks resident overseas who are not aware of their obligation to file and for one reason or another have never been hassled about it. It really depends on your situation, your income, your "need" for a passport or other benefit of being a US citizen.

I'm not saying don't file. But if you haven't been filing, you need to assess your own risks before getting all stressed out about things. Often, a good faith effort to catch up will work wonders even if the filings aren't perfect. OTOH, if you catch the eye of the IRS for some reason, you're up the old creek without a paddle. But it's up to you exactly how much angoisse you want to put yourself through.
Cheers,
Bev
 

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Yes, you should have been filing US taxes the whole time. You probably won't own anything, but be aware that the IRS does not consider the Australian superannuation fund to be tax deductable and you should be filing an FBAR for it.
 

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Not only retirement funds, but future investments in everything....

Yes, you should have been filing US taxes the whole time. You probably won't own anything, but be aware that the IRS does not consider the Australian superannuation fund to be tax deductable and you should be filing an FBAR for it.
Just to add on to RodGrods post;

Depending on your situation, if you have been lucky enough to inherit or make a retirement nest-egg for yourself already, it is indeed very possible that some of your income which is low taxed or not taxed in Australia, will be taxed by the US and you will owe US taxes. Any retirement fund or investment in Austalian patrimonial fund etc. must be reported on multiple forms and taxes paid (sometimes even on non-realized capital gains to avoid penalizing tax when you do sell it)...

Any sale of Australian real estate must be reported, eventually US capital gains taxes paid on it.

Basically, as a US citizen abroad, you are not allowed to take advantage of any retirement tax incentives given by your country as it will be taxed by the US.

If you give anything to your non-citizen husband or non-citizen children, you must declare and pay taxes on that. If you receive a gift from your parents, either they are US citizens and must declare it and pay gift tax on it, or if they are not us citizens you must declare it (high penalties for not knowing about this).

If a US citizen abroad dies, his entire estate is subject to US estate tax (even if you are above the threshold there will be expensive legal counsel fees to deal with for your family abroad).

If you start up your own business in Australia you will have to perform US accounting on reporting everything and subjecting it to US tax as well as eventual IRS scrutiny and audit.

What's more, the forms change every year, for the past 7 years getting more and more complicated each time.

Every time you make any financial move in your daily life you will have to think about the US tax consequences, penalties, and cost of compliance.

After coming into compliance and trying to live like this, you will probably after a few years decide to renounce like so many people are preparing to do today.

see Why people expatriate | HodgenLaw, PC
 

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Hey, Jimmyjam, you're entitled to your opinion - but I do wish you'd get it straight about "gift tax" declarations. A gift tax declaration is just that, a "declaration." The "tax" part usually doesn't get settled until after the death of the giver, at which point the gift is lumped back in with the estate when they're figuring out how much estate tax is due.

And, at present, only those with $5 million in assets at the time of their death (or who have given away at least $1.5 million before hand) even have to bother filing estate tax - and this includes those of us living overseas.

If you've got that level of assets, I reckon you can afford tax assistance. For the run of the mill expatriated US citizen, the filings are an inconvenience, but certainly not worth the going rates for overseas CPAs, tax lawyers and the $450 renunciation fee I hear the consulates are asking these days.
Cheers,
Bev
 

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gift tax declaration

Hey, Jimmyjam, you're entitled to your opinion - but I do wish you'd get it straight about "gift tax" declarations. A gift tax declaration is just that, a "declaration."
If you've got that level of assets, I reckon you can afford tax assistance. For the run of the mill expatriated US citizen, the filings are an inconvenience, but certainly not worth the going rates for overseas CPAs, tax lawyers and the $450 renunciation fee I hear the consulates are asking these days.
Cheers,
Bev

Yes, it is a declaration, but if you didn't know about it and report it (I think you have 90 days or something), there is a 30% penalty!

So you must keep up on filing and reporting obligations of every imaginable financial transaction.

You are right if you only have earned income, you have no investments or assets, no inheritance, if you don't hold shares or control a small company... you probably can stay a US citizen.

What about the hundreds of thousands of Canadians in the US and Americans in Canada who are now facing confiscation of their hard earned retirement simply because they did not declare their Canadian RRSP.

I truly do not believe that these tax policies only impact the "rich".

Did you even have a look at the excellent article I posted?

Why people expatriate | HodgenLaw, PC
 

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The IRS has launched one of its typical "shock and awe" campaigns in Canada over this FATCA and FBAR stuff. Their targets are those who are actually hiding investments and/or income.

The "excellent" article you keep citing is fairly typical of the type of "professionals" looking to drum up business by panicking the herd into steps like renouncing their US citizenship. (They certainly have a vested interest in all those fees generated by folks bringing their tax declarations up to date only to renounce formally.)

When you get credible word of anyone resident outside the US being hit with the full force of the FATCA fines and penalties due simply to having a legitimate retirement fund (in Canada or elsewhere) or other run of the mill investments, you come back and let us know.

But until that point, individuals need to consider for themselves what their risk profile is and decide for themselves how much time and effort they are willing and able to put into fulfilling their US filing obligation.
Cheers,
Bev
 

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Just to add on to RodGrods post;

Depending on your situation, if you have been lucky enough to inherit or make a retirement nest-egg for yourself already, it is indeed very possible that some of your income which is low taxed or not taxed in Australia, will be taxed by the US and you will owe US taxes. Any retirement fund or investment in Austalian patrimonial fund etc. must be reported on multiple forms and taxes paid (sometimes even on non-realized capital gains to avoid penalizing tax when you do sell it)...

Any sale of Australian real estate must be reported, eventually US capital gains taxes paid on it.

Basically, as a US citizen abroad, you are not allowed to take advantage of any retirement tax incentives given by your country as it will be taxed by the US.

If you give anything to your non-citizen husband or non-citizen children, you must declare and pay taxes on that. If you receive a gift from your parents, either they are US citizens and must declare it and pay gift tax on it, or if they are not us citizens you must declare it (high penalties for not knowing about this).

If a US citizen abroad dies, his entire estate is subject to US estate tax (even if you are above the threshold there will be expensive legal counsel fees to deal with for your family abroad).

If you start up your own business in Australia you will have to perform US accounting on reporting everything and subjecting it to US tax as well as eventual IRS scrutiny and audit.

What's more, the forms change every year, for the past 7 years getting more and more complicated each time.

Every time you make any financial move in your daily life you will have to think about the US tax consequences, penalties, and cost of compliance.

fAfter coming into compliance and trying to live like this, you will probably after a few years decide to renounce like so many people are preparing to do today.

see Why people expatriate | HodgenLaw, PC
I agree with Bev that these attorneys are exaggerating things to drum up fear and thus business, it is indeed true that many US persons abroad could wind up owing substantial US taxes on what are tax-free situations where they live. I will have had to pay close to $12,000 in phantom capital gains taxes on mutual funds where I live, even though they had tax-free status where I live. The US doesnct recognize these types of foreign tax free invrstments...I'd made the mistake of going native as i hadn't been aware of the continued US taxation. Turns out there are clauses in the tax treaties that still allow for double taxation for US persons...the UK will not protect me from this...I am very upset but had I sought the proper professional advice, wouldn't have ended up in this mess, sp blame myself...it's harsh but I should have known.
 

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The "excellent" article you keep citing is fairly typical of the type of "professionals" looking to drum up business by panicking the herd into steps like renouncing their US citizenship. (They certainly have a vested interest in all those fees generated by folks bringing their tax declarations up to date only to renounce formally.)
Actually, Hodgens is a very nice, fair and funny guy and if you read through his blog you will see that he is definitely not trying to panic the "herd" into renouncing. His are some of the most intelligent, matter-of-fact, calm posts I have seen on this whole business.

I know one Americans here who has had to resign from a board post because of FACTA. And I know another American small shop owner who is seriously considering renouncing because of the insane IRS reporting requirments for businesses. She never ends up owing anything but the paperwork costs her a great deal of time and money every year. It is more than an "inconvenience"; it is a serious hassle!
 

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However, though I should have known, it's only been recently that the IRS has been actively enforcing FBAR and expat tax compliance. The forms are so complicated that I now consider it too risky not to continue paying a specialized accountant....this is effectively a further tax on tax but don't want to risk fines for getting things wrong. It's the pricr of my US citizenship, I suppose...
 

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I know one Americans here who has had to resign from a board post because of FACTA. And I know another American small shop owner who is seriously considering renouncing because of the insane IRS reporting requirments for businesses. She never ends up owing anything but the paperwork costs her a great deal of time and money every year. It is more than an "inconvenience"; it is a serious hassle!
Would be interested in a few more details of the guy who "had to" resign from a board post (corporate or association?). And, the instructions I saw for reporting ownership interest in a business apply only to "financial investment" ownership, not where you're working in the company and being paid a salary.

But her accountant may disagree, or there may be facts and circumstances that explain the difference in treatment.
Cheers,
Bev
 

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I agree that the US are trying to "drum up fear" and they are succeeding and spreading the net very wide. My situation is that I am an Amercan citizen by birth and hold an Amercan passport. I am also a British national which I took up over 14 years ago. I moved to England when I was 9 years old (I am now 56) and since then I have never lived or worked in the States. Although working as an accountant for the past 30 years I was totally unaware that I should have been filing returns with the IRS and the situation only arose as a result of an interview with my Financial advisor. The US are requiring any financial company with dealing with the States to disclose any Americans on their books. It is now my problem and can no longer fly under the radar even if I wanted to.
Just one question - how on earth do I go about applying for a SSN? I so not live anywhere
near the US embassy in London and I understand that you have to apply in person?
 

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My firm is currently working with 3 clients who 'were flying under the radar' and were found and assessed by the IRS - One in Australia whose accounts were frozen and liquidated @ US $100,000 - one is in Austria who discovered he was 'found' when his ATM card failed to work and discovered his account had been seized and one in Canada who was assessed and is required to file 6 years of both personal returns, business returns and FBARs.

In all cases no taxes were actually owed. Their only violation was that they failed to file.

As opposed to drumming up fear, when clients come to our firm they are most often quite rattled and genuinely scared because their fiscal lives have been frozen and part of our work is offering the reassurance they need to see themselves through to becoming whole with the IRS.
 

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Hi All,

I had a look through the forum but didn't exactly find an answer.

I am a dual national between Australia and USA.

Basically I was born and grew up in Australia, my Mum is American and when I was born she applied for a USA passport for me, as she thought it would be a useful thing to have in the future.
As a child I held both a Australian and American passport but I no longer have an active American passport.

I have never lived or worked in America.

I am 30 now and I am trying to work out if I should have been doing both Australian and American tax all this time?

Any advice would be great.

Thanks
That's something you'll have to decide. Either you can file US taxes for the rest of your life and possibly be double-taxed or maybe even penalized, or you can choose to be more Australian and not have to worry or deal with that. I think that this might be a tough decision and only you will know what is best.
 

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I suspect that GJJD is spamming...but for what it's worth, my understanding is that the IRS rarely can directly freeze or seize assets from a non-US account...they would have to pursue such seizures through the foreign courts. However, many expats retain much of their assets in US accounts and investment funds which could be targetted by the IRS as lower hanging fruit.

The real reason why people need to start filing if they haven't already been doing so is because with FATCA, it will become a lot easier for the IRS to sniff out undisclosed foreign accounts. It will be after FATCA is fully implemented that things will get nasty if people haven't come into compliance.

In the meantime, I believe they are still accepting good faith efforts to comply and get into compliance. It will mean a growing market for cross-border tax preparers.
 
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