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US Expat living in the UK - Filing US taxes

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Robstin2014
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United States of America

US Expat living in the UK - Filing US taxes

Post by Robstin2014 » Wed Jan 13, 2021 2:21 pm

Hi,

My wife is a US citizen and has lived in the UK since 2016.

Since living here she has never filed her US taxes as she is not employed over there and thus earns no income. It goes without saying that she has been paying tax in the UK since 2016.

It has been brought to our attention by a fellow US expat living in the UK that US citizens are still required to file taxes every year even if they earn no income in the United States! Apparently through the FBAR / FATCA forms.

This comes as a concern to us as we have not filed ANY taxes for years and had no intention of ever paying taxes to the United States as neither of us live/work/study there...!

Does anyone have any experience filing US taxes as US citizen living in the UK?

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CR001
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Re: US Expat living in the UK - Filing US taxes

Post by CR001 » Wed Jan 13, 2021 6:14 pm

Kindly find a US tax forum to post these questions. This is not the correct forum/site for tax questions.
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obormot
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Re: US Expat living in the UK - Filing US taxes

Post by obormot » Thu Jan 28, 2021 6:33 pm

I know of US citizens in UK who did not file US taxes for more then 20 years.. That said, US IRS is more and more after its citizens abroad (and in general, there is more and more of information sharing between countries etc.). So if you do not comply, your chances to get caught are not small.
However, UK tax rates are higher then US tax rates (and you can count UK taxes paid against potential US ones), and US citizens living abroad do not pay taxes at all from first about $100,000 of earned income (i.e. salary), so most probably your wife would not owe any actual tax (unless she heavily engages in passive rental activities and UK stock market)
The important thing though is that if she just files backward US taxes and FBAR now, IRS might go after her with absurd penalties.
They do have a protected route of filing "delinquent" returns under some no-penalty or minimal penalty guarantees, but one has to be very careful to make sure it is done correctly (so that they would not go after her).
There is a forum of US expats in UK (something like "UK-Yankee"), they might help, though it is not very populated.
IRS website itself might be very useful, if you are obsessive enough to actually read it.
And there are plenty US tax lawyers in London - it is probably worth it to pay them once for consult.
There is also an option to renounce US citizenship..

obormot
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Re: US Expat living in the UK - Filing US taxes

Post by obormot » Thu Jan 28, 2021 6:43 pm

Ah, and there are two DIFFERENT filing obligations!
One is tax return (IRS = US variant of HMRC) - where you report your income and figure out US income tax - much like in UK self-assessment.
Another is FBAR, where you report to FBI all your non-US bank accounts with max in year amounts on them (and this is not for tax purposes, but under the pretext of "anti-terrorism")
And non-compliance with this 2nd one can lead to creasy penalties.
But they have a streamlining program for expats, where one can file both together for, I think, up to 7 years back, with protection against penalties.

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