
1. As an accidental American You do NOT have a tax problem. The reason is simple. You are not in the U.S. tax system. (Once you enter the U.S. tax system you will have tax problems for as long as you are a “U.S. person”).
2. If you are a “U.S. person” (you should investigate this) then you have a “compliance” (or rather “non-compliance”) problem. What does this mean? Hint: If you don’t yet have a tax problem, you don’t start by calling a tax professional.
3. You probably are so “Dazed and Confused” that you are NOT capable of making any decision. You don’t even know HOW TO MAKE A DECISION. Furthermore, you cannot delegate your inability to decide anybody else. You need to take your time and educate yourself.
4. I repeat point 3. You are NOT capable of making any rational decision. Proceed slowly!
Some first steps:
This is the IRS Publication that “explains” (sort of) the tax rules that apply to Americans abroad. Take your time. It will give you some background for a discussion with an adviser. Once again, PLEASE do some prep work on your own. That way you will be better able to evaluate the advice you are given.
(While you are reading Publication 54 you might look for information about some of the following: FBAR, Form 8938, Form 3520, Form 3520A, Form 1116, and Form 2225. (But there’s much more. These are just a few “of my favorite forms”.)
A. Those born in the USA begin life as U.S. citizens but they may have lost it along the way.
B. Those born outside the USA are NOT U.S. citizens without proof of additional facts.
If you have any doubt about your “USness”, then you should address the “State (no pun intended) of your U.S. citizenship.”
No problem. It’s easy. You just file them. The real questions are:
A. How many years should I file?
B. Do I just file them or do I file them using one of the “IRS Compliance” programs? (A current example of an “IRS Compliance” program would be “streamlined compliance.)
I suspect that the IRS has few friends. But, the IRS is NOT your problem. The IRS is charged with the unfortunate task of administering incomprehensible laws outside the U.S. Would you want that job?
So far, there have been few Americans abroad (unless you “signed up to pay penalties by entering the “Offshore Voluntary Disclosure Programs”) who have been subjected to penalties for not knowing they had to file U.S. taxes.
(If you don’t want to pay penalties, then you should NOT enter the “Offshore Voluntary Disclosure Program” – “OVDP”. It is the worst way to come into U.S. tax compliance. “OVDP” is a program for those who KNOW THEY ARE CRIMINALS and have been using “offshore bank accounts” to hide money from the IRS. That is almost certainly not YOU! So, don’t enter the OVDP program unless at least three different lawyers (who don’t know each other) recommend it.)
It’s the laws themselves that are the problem. The IRS cannot change the laws. It’s Congress that is the problem. It’s Congress that created FATCA and continues “citizenship taxation”. (Fortunately, the USA is currently considering tax reform.)
“Sacred Trust: Counselling U.S. citizens abroad in a FATCA world”
That’s the title of a seminar that I presented to a group of U.S. tax professionals in the U.K. The point is that counseling U.S. citizens abroad are:
– partly about citizenship
– partly about tax
– partly about financial planning
– partly about emotional counseling*
and always about “Life Planning”!
Proceed slowly. Proceed carefully. Proceed with the knowledge that whatever decision you make will have to live with it for life!
Contact us for more information
John Richardson is a Toronto-based lawyer with a clear understanding of the legal, tax, Retirement Planning, and investment climate in Canada. He also has a good understanding of the obligations of U.S. citizens abroad. He provides “citizenship counseling” for U.S. citizens abroad. Quote: The truth is that citizenship counseling is a form of life counseling.
Understanding the US tax system, the obligations, and all the additional terms can be difficult. Especially if one lives outside of America. Is your question not answered? Contact us.
U.S. citizens and resident aliens who live abroad are generally required to file a federal income tax return and pay taxes on their worldwide income.
Read more... about Who is required to file taxes in the US?Yes, US citizens are required to file taxes on their worldwide income, regardless of where they are living.
Read more... about Do US citizens living abroad still have to file taxes in the US?Received an American check? You can cash your check in the following ways: cash the check at your own bank, transfer to another person (endorsement), cash checks using an online service or cash the check by another bank.
Read more... about How can I cash my US check?US citizens living abroad may be required to file Form 2555 and/or Form 1116 to claim the foreign-earned income exclusion.
Read more... about Are there any special tax forms required for US citizens living abroad?FBAR (Foreign Bank Account Report) filing is the requirement for certain U.S. individuals and entities to report their foreign financial accounts to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The FBAR filing requirement applies to U.S. persons who have a financial interest in, or signature authority over, one or more foreign financial accounts if the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.
Read more... about What is FBAR filing?