# US taxes for someone who has never lived in the USA



## ur85q (Feb 21, 2015)

My wife was born in the UK to American parents, and so became a US citizen by birth abroad. Her parents moved to Australia where she was raised and lived her life (also acquiring Australian citizenship). We we married in Australia (I'm an Australian). 

We recently moved to the US (she on her US passport, me on a work visa), and I'm looking at preparing tax returns for the year. Information I'm reading on the IRS website suggests that ALL US citizens need to file a US tax return, regardless of where they are living ... which suggests that my wife should have filed a US tax return each year. Is that right? Growing up and living in Australia, it never crossed her mind that she would even need to think about filing a US tax return.

She's 35 now ... is she technically behind on filing her last 15+ tax returns? If so, what should she do? Frightening prospect!


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## twostep (Apr 3, 2008)

She is behind but there are options for US expats. Bev has posted a link several times and I cannot get my hands on it. She will be able to help your wife.


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## Bevdeforges (Nov 16, 2007)

Hop on over to the Expat Tax section here: Expat Tax - Expat Forum For People Moving Overseas And Living Abroad

She is far from the first person to have discovered this little "benefit" of US citizenship. But the good news is that there is a "Streamlined Compliance Program" for both overseas residents and US residents where she basically just files the current year plus three prior years (so 2014, then 2013, 2012 and 2011) and she's more or less done.

Oh yeah, there's also something about filing 6 years of back FBARs - but that's just a statement of your overseas (i.e. non US) bank accounts.

It's highly unlikely she'll owe any taxes for those three back years.

Anyhow, info on the Streamlined Compliance program is here: Streamlined Filing Compliance Procedures

And post your questions as they come up in the Expat Tax section.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

One thing she ought to test/check is taking the Foreign Tax Credit only (not the Foreign Earned Income Exclusion) when she runs her U.S. tax calculations for those back years. There's a decent chance her failure to file U.S. tax returns means she's missing out on excess foreign tax credits (based on the likely higher income tax she paid in Australia) that she can now use to reduce her U.S. income tax bill if she does catch up.

Said another way, if she paid a higher income tax rate in Australia than her hypothetical U.S. rate in those past years, she can "bank" the difference and roll that difference forward to this tax year and future tax years. It used to be possible to carry forward those excess credits 5 years into the future, and in recent tax years it's 10. She really ought to take advantage of that! If I'm right, she can knock down her U.S. tax bill quite nicely with those excess credits calculated from at least recent past years in Australia.

Definitely something to look into.


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## ur85q (Feb 21, 2015)

Thank you Bev and thank you BBCWatcher - great tips and pointers that I'm looking into now!

As I begin reading through some of the posts in the expat tax forum, it becomes clear to me that I really should seek some formal advice to work through the specifics of my situation (and how to most effectively navigate through, given tax treaties, etc). Do you have any tips on how to find an "expert" to help with this? I found someone in the US who claims to know his stuff, but I have no idea how to gauge his expertise or whether his $4k quote for services is worthwhile. Any pointers?

@Bev: I also note some discussion on the tax forums around the additional "little benefit" (as you put it) of US citizenship, and wonder whether how this applies to permanent residents (if at all). I'm contemplating applying for a green card and am curious to know whether this puts me into the US tax net (that generates so much discussion) from then on. It seems to me that it doesn't ... is that right?


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## Bevdeforges (Nov 16, 2007)

As a permanent resident, you're on the hook for US taxes anyhow, like you would be anywhere. A green card puts you on the IRS radar for as long as you hold the green card. (Just make sure you formally surrender it if and when you leave.) 

If you take US citizenship, you are basically signing up for eternal US tax obligation. Now, normally if you're settled somewhere outside the US you'll owe little or no taxes to the US, however things get stickier if you have locally tax-free income that isn't recognized as such by the IRS. And, there is always the issue of "complex" investments which may involve FATCA reporting issues.

Frankly, a $4K quote for tax preparation services seems a tad high - unless you and your wife have some considerable investments or some of the aforementioned complex investments. If you want to do it yourself, take a look at the IRS publication 17 - which is the basics of income taxation. Most of the information you can ignore, but it does get down to the fundamentals. Then, there are a variety of tax preparation software programs - which many folks find perfectly adequate to guide them through the process. (Frankly, the first time is the worst. After that you tend to just follow what you did last year.)
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

It cuts both ways, though. Only your wife will be able to "import" higher income taxes back into the U.S. to cut her U.S. tax rate (assuming her Australian rate was higher than her hypothetical U.S. rate). That's a _benefit_ of U.S. citizenship, and isn't she lucky?

Every citizenship is a package deal with rights, privileges, and obligations. For most people most of the time U.S. citizenship is among the world's most valuable. Australian citizenship is another very good one.


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## ur85q (Feb 21, 2015)

@Bev: $4k feels expensive to me as well (actually it's $4.5k), but he claims it's a complex space with the tax treaty, treatment of superannuation in Australia, and a "company" I am the director of in Australia. He's telling me to trust him, that he'll be able to justify the expense insofar as his strategy will more than pay for itself multiple times over. I guess I'll give it a go ... but I'll have little idea of whether the benefits are real (compared to what?), and whether he will take a purely US centric view at the expense of AU considerations. I'll share any "gems" he comes up with!


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