# What if I Stop Filing US Tax



## whistlerexpat

I was born in the US in 1947 lived there till 1948 and in Canada as a Canadian citizen for 68 years
I have been filing US taxes for the last 15 years and tired of it. I have no connections to the US, no relatives and do not own any US assets. 
What can the IRS do to me if I just completely stop filing.


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## Bevdeforges

Basically, nothing, unless you have US sources of income. There are all sorts of reasons that people legitimately stop filing returns. The most common one is simply that their income is less than the reporting threshold for their filing status. My Dad got a letter from the IRS asking him NOT to file any more because he and my Mom were living off their savings and really did consistently have income below the filing threshold for several years.

Unless something comes to the attention of the IRS (like when Boris Johnson, the mayor of London, sold his house for 4 million) they'll probably just assume that you're retired and living off your savings.
Cheers,
Bev


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## whistlerexpat

Thanks very much. I am thinking of doing that soon as going into retirement and the reporting even gets more complicated and expensive.


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## chuck846

Bevdeforges said:


> Basically, nothing, unless you have US sources of income. There are all sorts of reasons that people legitimately stop filing returns. The most common one is simply that their income is less than the reporting threshold for their filing status. My Dad got a letter from the IRS asking him NOT to file any more because he and my Mom were living off their savings and really did consistently have income below the filing threshold for several years.
> 
> Unless something comes to the attention of the IRS (like when Boris Johnson, the mayor of London, sold his house for 4 million) they'll probably just assume that you're retired and living off your savings.
> Cheers,
> Bev


But but but - what if whistlerexpat has substantial interest earning savings in Canada ? Doesn't the US expect its taxes ? Not to mention the 1116's and 8938's ? I don't have a clue ...


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## Nononymous

whistlerexpat said:


> Thanks very much. I am thinking of doing that soon as going into retirement and the reporting even gets more complicated and expensive.


Stop completely, then if you ever see a letter from the US government, write "return to sender - moved, address unknown" or "deceased" or some such thing on the envelope and throw it back in the mail.

Problem solved.

I would not want to be on the IRS radar if I sold my house in Whistler and made a pile in capital gains - non-taxable in Canada, but taxable in the US beyond a relatively modest limit ($250k for single, $500k for couple).


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## whistlerexpat

Nononymous said:


> Stop completely, then if you ever see a letter from the US government, write "return to sender - moved, address unknown" or "deceased" or some such thing on the envelope and throw it back in the mail. Problem solved. I would not want to be on the IRS radar if I sold my house in Whistler and made a pile in capital gains - non-taxable in Canada, but taxable in the US beyond a relatively modest limit ($250k for single, $500k for couple).


I have been filing and compliant all these years and just want it over and not have to go through the expensive and time consuming process to renounce.


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## Nononymous

whistlerexpat said:


> I have been filing and compliant all these years and just want it over and not have to go through the expensive and time consuming process to renounce.


Well, don't do it this year and see if anything happens - and please report back if it does.


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## whistlerexpat

Nononymous said:


> Well, don't do it this year and see if anything happens - and please report back if it does.


 I have already filed this year as still working but will not next year and let you know if successful


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## Bevdeforges

chuck846 said:


> But but but - what if whistlerexpat has substantial interest earning savings in Canada ? Doesn't the US expect its taxes ? Not to mention the 1116's and 8938's ? I don't have a clue ...


It really depends on lots of things. What is "substantial" interest? Does whistlerexpat have any exposure due to US sources of income or US accounts? And ultimately, does whistlerexpat actually owe any US taxes? If not, the IRS is not likely to come looking for him, even for "technical" violations.
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> Basically, nothing, unless you have US sources of income.


Or U.S. assets.

But I think the question was "What can the IRS do?" Well, starting on January 1, 2016, the IRS can (a) file a tax lien against you (it could already do that); (b) if that tax lien accumulates to a tax debt of $50,000 or more (including interest and penalties), declare you "seriously tax delinquent" to the U.S. State Department. The U.S. State Department will then revoke your U.S. passport and refuse to renew it until the tax lien is cleared.

Is all that likely in your case? Probably not. It's fairly hard for a resident of Canada to accumulate a U.S. tax debt of $50,000 or more. But the IRS _could_ do that in such circumstances. Note that I'm assuming you continue filing FinCEN Form 114s. There are real, published penalties for failure to file "FBARs" when obligated, and as far as I know those penalties feed straight into the tax lien arrangement that I described. _Theoretically_ those could add up pretty quickly.


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## Bevdeforges

What "can" they do, and what they are likely to do are very different things here. Even with the FinCENs, there's no evidence (yet) that they will pursue every single situation where they get a report from a bank overseas about a potential US person who has not filed a FBAR for that year. It depends on all the usual risk factors - what sort of balances you have in the accounts and whether or not there is reason to refer to your FBAR due to "oddities" on your tax return. 

Like everything in life, it's a set of risks you have to evaluate for your own situation.
Cheers,
Bev


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## BBCWatcher

Letters in the mail are pretty cheap, though. Especially for the U.S. Treasury. Conceivably the Treasury could even outsource them, allowing the outsourcer to collect a percentage of the haul.

FinCEN Form 114 is a very binary thing. I think it's wise to file it whenever required.


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## iota2014

chuck846 said:


> But but but - what if whistlerexpat has substantial interest earning savings in Canada ? Doesn't the US expect its taxes ? Not to mention the 1116's and 8938's ? I don't have a clue ...


It's time-consuming and uncertain, trying to collect taxes beyond US borders. Basically the IRS has to rely on seizing any US assets, or ask the local tax authority (in this case, the CRA) to help them out. IRS agents are clearly none too sure what they can safely do, and what might get them in a whole bunch of trouble. And on the other side, although many taxing authorities may be eager to assist, they, too, are in murky legal waters in handing over their own taxpayers' financial information to a foreign tax authority. So they, also, must proceed carefully, checking and double-checking at every stage lest they all end up in court - or, even worse, in the headlines.

It's a lot of risk when you can't even be sure of collecting so much as a decent non-wilful FBAR penalty at the end of it.


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## whistlerexpat

Bevdeforges said:


> It really depends on lots of things. What is "substantial" interest? Does whistlerexpat have any exposure due to US sources of income or US accounts? And ultimately, does whistlerexpat actually owe any US taxes? If not, the IRS is not likely to come looking for him, even for "technical" violations. Cheers, Bev


Hi Bev. I do not have any US source income or US property. My total assets in Canada are probably around 1.3 million. I do have a US passport due to the fact I was hassled a couple of times due to using my Canadian passport with a US birthplace and detained at the airport and almost missed my flight. I have been filing US taxes for some time plus fincin fbars etc. My banks do not know I am a US citizen so just want to stop all this tax reporting pressure. I do not go to the US anymore as our dollar is 30% below the canadian dollar and want to retire in peace. Everything I have read states the IRS can not inforce tax collection in Canada if the individual was a Canadian citizen at the time of any tax issues which I am.


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## Nononymous

Given that you're apparently up to date on your taxes, why not renounce? Even at today's exchange rates, might be worth the $2350 because you've already done the hard work of becoming tax compliant.


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## byline

Why should the individual have to go through the expense of renouncing? If s/he has no tangible connection to the U.S., and no intention of spending any time there, then what's the point?


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## Nononymous

byline said:


> Why should the individual have to go through the expense of renouncing? If s/he has no tangible connection to the U.S., and no intention of spending any time there, then what's the point?


I agree. But the OP has a tangible connection - 15 years of filing tax returns. That qualifies as on the radar. If I was caught up on all the paperwork the prospect of making it go away forever, even at an extortionate price, might be an attractive option.

Or just ignore it next year and throw away any mail you might receive, if you don't intend on spending much time in the US.


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## byline

What I meant by tangible connection has more to do with family in the United States and a desire to visit them, or income/assets in the United States. If that doesn't exist, then other than past tax filings, what connection does the individual have? And, if that individual is a Canadian citizen, then realistically what can the IRS do if the individual just stops filing?


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## Nononymous

byline said:


> What I meant by tangible connection has more to do with family in the United States and a desire to visit them, or income/assets in the United States. If that doesn't exist, then other than past tax filings, what connection does the individual have? And, if that individual is a Canadian citizen, then realistically what can the IRS do if the individual just stops filing?


Not very much.


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## whistlerexpat

Nononymous said:


> Not very much.


I am convinced a lot of this fear mongering regarding the IRS and expat taxation is promoted by the tax accountants and lawyers


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## maz57

What it all boils down to is how fearful might you be of the remote possibility of getting a brown envelope in the mail some day in the distant future. Yes, there is definitely some fear mongering, even on this board. Ignore it. True, the IRS might "reach out", but they can't touch you.

I quit filing some years ago. I haven't heard a peep.


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## Bevdeforges

whistlerexpat said:


> I am convinced a lot of this fear mongering regarding the IRS and expat taxation is promoted by the tax accountants and lawyers


Absolutely agree. And when I was in business school studying taxes, the instructor told us how the IRS uses publicity to try to scare taxpayers straight precisely because they don't really have the time and manpower to check every single return in any level of detail. So they publicize their biggest tax arrests shortly before the filing deadline to "encourage compliance."

That was many years ago - and the IRS budget has been cut back several times now. 
Cheers,
Bev


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## BBCWatcher

maz57 said:


> True, the IRS might "reach out", but they can't touch you.


I'll restate what I wrote upthread. Starting on January 1, 2016, the U.S. State Department now has both the power and the mechanisms to revoke and refuse to renew the U.S. passports of "seriously tax delinquent" individuals. Those are individuals who have formal tax liens of $50,000 or more, inclusive of penalties and interest (and presumably inclusive of FinCEN Form 114 penalties, if applicable).

The IRS can, via the State Department, "touch" U.S. passport holders anywhere in the world. That's new, that changed.

I think we're also presuming not only zero assets but also zero physical presence in the United States. Being hassled by CBP is inconsistent with that assumption. There is such a thing as an arrest warrant, and on occasion that happens.

How you judge these risks and their impacts is up to each individual, of course. But "can't touch" is overstated, I'd say.


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## byline

Again, though, the only weight this threat carries is if an individual intends to use his/her U.S. passport. If that's not the case, then for that individual it's a moot point.


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