What should a US citizen living abroad do if they’ve never filed a tax return?

3 min

Filing Requirements for U.S. Persons:

America is the only first-world country in the world, that enforces a tax duty on American citizens, wherever they live or work (with or without a passport, green card holders, and others).

U.S. citizens or residents living abroad (U.S.persons) must file a U.S. federal tax return if their global income exceeds the IRS-specified filing threshold. This includes all income sources, such as wages, interest, investments, and rental income, regardless of where the income is earned. For self-employed individuals, the threshold is as low as $400.

How does the Foreign Earned Income Exclusion benefit U.S. Citizens abroad?

The Foreign Earned Income Exclusion allows qualifying U.S. persons to exclude a certain amount of their foreign earnings from U.S. taxation. In 2023, this exclusion was up to $120,000. This helps many Americans abroad avoid double taxation, though they must still file a U.S. tax return.

What happens if you renounce your U.S. citizenship?

Renouncing U.S. citizenship doesn’t automatically relieve one of past tax obligations. Expatriates must file Form 8854, confirming they’ve complied with all U.S. tax obligations for the five years preceding the renunciation. Failure to do so can result in continued IRS obligations or penalties.

Normally, you can renounce citizenship quite inconspicuously. However, in the US, this is not the case; your name is listed in a public register, a list of people who have renounced their citizenship.

What are the consequences of not filing U.S. Taxes while living abroad?

Non-compliance with U.S. tax laws can lead to severe penalties. Under FATCA, foreign financial institutions report accounts held by U.S. citizens, making it harder to hide foreign assets. Penalties can include significant fines, such as $50,000 or 50% of the balance in unreported overseas accounts for FBAR violations.

How can U.S. Citizens abroad become compliant with tax laws?

  • How does the IRS Amnesty Program work?

The IRS Amnesty Program, specifically the Streamlined Filing Compliance Procedures, is designed to help U.S. citizens living abroad who were unaware of their tax filing obligations. By filing the last 3 years of tax returns and the last 6 years of FBARs under this program, expats can become compliant without facing penalties for filing late.

  • What are the risks of an IRS audit?

The risk of an IRS audit increases if you don’t comply with filing requirements or if there are inconsistencies in your tax returns. Staying compliant with tax laws and accurately reporting income and foreign assets can significantly reduce this risk.

How do tax treaties affect U.S. citizens living abroad?

Tax treaties between the U.S. and other countries can affect how U.S. citizens are taxed abroad. These treaties may provide relief from double taxation and define tax obligations. However, these treaties do not exempt U.S. citizens from the obligation to file U.S. tax returns.

Americans Overseas can help you if you’ve never filed a US tax return

We, the founders of Americans Overseas, were born in the Netherlands and obtained our American nationality through our (American) mother.

When we heard about the US tax system for the first time around 2013, we were in total disbelief (it can’t be true!), anger (how can they do this?), fear (am I going to get fined or pick up other problems?), and panic (what should I do?). It is (unfortunately) true that there is an additional American tax levy. But there’s no information from the local government, and when approached, the consulate referred us to the IRS, and the IRS was impenetrable.

That’s why we started this initiative to help people from all over the world by providing proper information about the US tax system to avoid unnecessary panic and offering help free of obligation and free of charge. If needed, we have a network of affordable professionals (accountants) who can help you if you’ve never filed a US tax return.

Contact us for more information