US tax return

watna

ok, I just read something that freaked me out a bit. Apparently if you hold US citizenship (which I do) you have to file a US tax return - even if you don't live in the US. Now, my source for this is wikipedia, which obviously isn't very reliable but still this is all very strange and has me a bit worried.

Here's the relevant bit:

Example: A person who holds both Australian and United States citizenship, lives and works in Australia. He would be subject to Australian taxation, because Australia taxes its residents, and he would be subject to US taxation because he holds US citizenship. In general, he would be allowed to subtract the Australian income tax he paid from the US tax that would be due. Plus, the US will allow some parts of foreign income to be exempt from taxation; for instance, in 2006 the foreign earned income exclusion allowed up to US$82,400 of foreign salaried income to be exempt from income tax.[19] This exemption, plus the credit for foreign taxes paid mentioned above, often results in no US taxes being owed, although a US tax return would still have to be filed. In instances where the Australian tax was less than the US tax, and if there was income that could not be exempted from US tax, the US would expect any tax due to be paid.

Has anyone heard of this before? I have only ever worked in America for about 4 weeks a few years ago when my friends went on a J1 and I went with them - but used my American passport and citizenship. Otherwise I have never lived in the states and haven't even really visited it that much.

It says above the exemption on foreign income is $82,400 which is a lot so it's unlikely most people have to pay tax but I just thought this is crazy. The US government would expect you to pay tax to them even if you are not living or working in the states and you are already paying tax to another government.

So what I'm wondering, from the quoted text above, do all American citizens have to file a US tax return? regardless of where they are in the world? That seems very strange to me, and clearly I'm not going to do it - but thought I'd see if anyone else had heard of this or also thought it was crazy.

Are some inland revenue officials in black suits going to track me down one day?!

margo321

My understanding is you'd only have to file if you would have a tax liability which is unlike as you would get a credit for the Irish tax paid.

Overheal

basically what its saying is the IRS wants records of all incomes of its citizens, foreign and domestic. You probably don't owe tax, so its not a big issue, and i dont think anyone will hunt you down for it. It only becomes tax evasion when you in actuality, owe taxes. but i stand open for correction on this.

GuanYin

You need to be resident for tax purposes to owe any tax.

I think the cut off is 180 days.


You're fine.

MyPerfectCousin

GuanYin wrote: »

You need to be resident for tax purposes to owe any tax.

I think the cut off is 180 days.


You're fine.

No, you don't. But you do have to earn more than $82K as a single person AND live somewhere with lower income taxes than the U.S. (As it says in the quoted text above.)

But the query was more about the requirement for a US citizen to file a return every year (whether or not tax is due). This is a sticky area, because technically, they make it clear that you do have to file. However, I can only see this as an issue for someone who has paid income tax while living in the U.S. in the past and intends to return there.

In that case, it would make sense to either file a return every year or at least keep records of your Irish tax returns so you will be able to retroactively get up to date with the IRS. You wouldn't owe any tax, but there could some kind of penalty for not filing.

I'd be interested to hear from anyone who fits this category of having worked in the US, left for years and didn't file, and then went back. What happened?

watna

MyPerfectCousin wrote: »

No, you don't. But you do have to earn more than $82K as a single person AND live somewhere with lower income taxes than the U.S. (As it says in the quoted text above.)

But the query was more about the requirement for a US citizen to file a return every year (whether or not tax is due). This is a sticky area, because technically, they make it clear that you do have to file. However, I can only see this as an issue for someone who has paid income tax while living in the U.S. in the past and intends to return there.

In that case, it would make sense to either file a return every year or at least keep re
cords of your Irish tax returns so you will be able to retroactively get up to date with the IRS. You wouldn't owe any tax, but there could some kind of penalty for not filing.

I'd be interested to hear from anyone who fits this category of having worked in the US, left for years and didn't file, and then went back. What happened?

Oh dear. To make it more complicated I now live in New Zealand so will have tax returns from both countries. I don't actually intend on ever living in America so probably keeping records will be enough but to be honest, I wouldn't be impressed at paying some of my hard earned money to a country I don't live in, regardless of the fact that I am an American citizen. It seems a bit excessive. Especially as I have dual nationality and my American one is not really used (e.g. I have perm residency in NZ but it is on the basis of my Irish passport). If they expect you to file tax returns regardless of not living there then there's not a huge amount of point in me having American citizenship - especially as I don't intend to live there (it is handy to have though because you just never know - I hope the state department don't come after me for saying that now! ).

I would also be interested to hear from someone that lived in America, went abroad for a few years and didn't file tax returns and then returned to tht states.

GuanYin

MyPerfectCousin wrote: »

No, you don't. But you do have to earn more than $82K as a single person AND live somewhere with lower income taxes than the U.S. (As it says in the quoted text above.)

Eek! you're right I was looking at the wrong section of the IRS website