# After 30 years I find I have to file??



## epsc

Here I am, a US citizen in Australia, lived here on and off since a kid, working in Australia since 1986 (never worked in the US) - NOW I find that I should have been filing returns every year!! Immigration guy at DFW asked me if I'd been filing my returns a little while back. I have downloaded the 1040's and 1116's for the last 4 years and am going to fill them out and file. I have paid tax in Australia all these years, considerably more than I would have had I been in the US, so I as I understand it I won't have any tax to pay, or any penalties for not filing.
I have 3 questions: 
(1) am I correct in thinking that because I have to file a 1116 together with the 1040, I will not be able to e-file, but will have to post my returns?
(2) I of course have never received a W-2 form. What do I do about that?
(3) my wife is an Australian resident and citizen, but 1040 seems to suggest that either I file a joint return or she has to file her own. Like me, all her income has been earned in Australia, where she has paid her tax. She has no SSN. I assume that I just enter her name where indicated, but leave the SSN section blank.
Sorry these are such obvious questions, but it's all a little daunting, and I want to get onto it right away.
Many thanks in advance!


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## BBCWatcher

Have a look at the IRS's offshore Streamlined Program. It's probably your best path to tidy things up. Also please start with IRS Publication 54.

You don't need W-2s to declare gross wages, salaries, tips, etc. on line 7 of Form 1040. You don't have them, and that's not a problem.

Your nonresident alien wife with zero U.S. source income has no U.S. filing obligations. Only you do. She can voluntarily elect to file a joint tax return with you, but she's under no obligation to do so. It's her choice. If she does not then you either file Married Filing Separately or, if qualified, Head of Household.

The Form 1040 instructions tell you exactly what to do when your nonresident alien spouse doesn't have a SSN or ITIN and isn't required to have one.


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## Bevdeforges

Start here for info on the Streamlined filing program:
https://www.irs.gov/Individuals/Int...-Taxpayers-Residing-Outside-the-United-States

Then take a look at Publication 54: https://www.irs.gov/uac/About-Publication-54
That will get you started.


> (1) am I correct in thinking that because I have to file a 1116 together with the 1040, I will not be able to e-file, but will have to post my returns?


No, you should be able to e-file, at least for the current return. Check the page noted above, but I think when you do your backfilings for the Streamlined program you will have to mail those in.


> (2) I of course have never received a W-2 form. What do I do about that?


You won't have a W-2 for any foreign source income (nor will you have the 1099 or other US reporting forms). Basically, they have to take your word for what you report as salary or other income - however if you use tax prep software, check carefully to see where they want you to report your foreign salary. You should NOT dummy up a W-2 form - usually there is a separate electronic form or worksheet for salary from a foreign employer.


> (3) my wife is an Australian resident and citizen, but 1040 seems to suggest that either I file a joint return or she has to file her own. Like me, all her income has been earned in Australia, where she has paid her tax. She has no SSN. I assume that I just enter her name where indicated, but leave the SSN section blank.


No - you normally should file as "married, filing separately" unless you can qualify as "head of household." There is an option to file jointly with your NRA (non-resident alien) spouse, but it requires that you report all her worldwide income as well, and you will have to get an ITIN (taxpayer identification number) for her. Publication 54 explains the option reasonably well. My personal take is that it's far more trouble than it is worth, especially if your spouse has significant income or really much of any income from "unearned" sources (interest, investments, etc.). But, your mileage may vary.

Anyhow, take it slowly and calmly. You're far from the first person to discover your tax obligation after decades of living abroad. You'll also not be the last. 
Cheers,
Bev


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## Nononymous

epsc said:


> Here I am, a US citizen in Australia, lived here on and off since a kid, working in Australia since 1986 (never worked in the US) - NOW I find that I should have been filing returns every year!! Immigration guy at DFW asked me if I'd been filing my returns a little while back.


So I'm curious, would you tell us in what context that question was asked? Where you attempting to enter the US with an Australian passport? Or was it simply out of the blue, after you stated that you'd been living and working in Australia for the past 30 years?

As far as we know, the customs & immigration people have no access to tax records. Furthermore it's not the case that every American living abroad is required to file US taxes - had you been a househusband with little or no income, for example, there would be no filing obligation. So the fact that they asked you doesn't mean they're at all aware of your tax status, or that your non-compliance has been reported to the IRS - quite likely it was just a question designed to scare and annoy.

Which is a long-winded way of saying that if you intend to live out your life in Australia, with only occasional visits to the US, it's a perfectly viable option to continue ignoring your US tax obligations, particularly if you now have Australian citizenship.

As a dual citizen living in Canada, I am cheerfully non-compliant and as yet don't see any compelling reason to put myself on the US radar.


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## expatwien

As BBCWatcher and BevDeforges commented, look into the Streamlined filing program. You will have to file FBAR forms for the last 6 years, in addition to filing 1040's for the last 3 years. Also look into the Foreign Earned Income Exclusion (form 2555) instead of the Foreign Tax Credit (form 1116). It's much easier to deal with if it fits your circumstances. It's best to use tax software to handle all of this. Also, if you use the Streamlined filing program, you must mail the tax forms in.

I went through all of this a few months ago, and the hardest parts were figuring out my maximum bank balances for the last 6 years (for the FBAR's), and filling out 4 form 1116 forms per year (2 each for bank accounts and for earned income). I ended up using TaxAct, which is fairly good and inexpensive for previous years (I think $15 US). The price is for 2015 is now $30 US for what I think you need. Other tax software would also work, but I am no familiar with other products.

Regards,
Expatwien


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## BBCWatcher

Australia had a comparatively high income tax, so skipping the FEIE may be well advised. However, I don't prejudge that question. Both paths are possible.


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## epsc

Thanks very much to all of you! To answer your query, Nononymous, I was just coming back in on my US passport, and the question just came out of the blue. However, the answer could lie in this: for the first time, I was not permitted to go in the 'citizens returning' line and bring my wife and daughter (non-citizens, non-residents) with me, as I had always done in the past, but because I was travelling with non-citizens I had to go into the non-citizens line at immigration. Which really annoyed (and annoys) me. I don't know whether it was a special little treat that the immigration folks at DFW put on for my benefit (never having had that experience at LAX).
I do intend to stay in Australia, with annual trips to the US to see family. Are you suggesting that I ought not bother about filing at all? I'd appreciate others' feedback on this as well - is that not a trifle risky?


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## BBCWatcher

There are published penalties if you fail to file FinCEN Form 114 and IRS Form 3520/3520-A when/if required to do so. There is a likelihood that enforcement will be more vigorous and common given increased financial data sharing. There's a 6 year statute of limitations on FinCEN Form 114, but I don't think there's a statute of limitations on failure to file 3520 or 3520-A.

The penalty for failure to file a U.S. tax return if you genuinely owe zero U.S. tax is zero, albeit with no statute of limitations if you don't file and are wrong. However, there are occasions when you're missing out on free money from the IRS if you fail to file a tax return. You mentioned you have a family. Do you have any U.S. citizen minor children by any chance? If so, that might open up some free money (the Additional Child Tax Credit). There is a 3 year time limit to claim free money, dated from the due date of the applicable tax return. So if you're entitled to free money (or some other refund) for tax year 2012 then you have until April 15, 2016, to claim it (or possibly June 15, 2016, if you're careful, but I wouldn't want to test that). Refunds/free money for 2011 and prior years are no longer claimable as I write this.


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## epsc

That's a good question, and one that I was going to ask about. My daughter is 13 and Australian-born, but I suspect I may be able to apply for a US passport for her, given that I satisfy (I think!) the post-age 14 years residency in the US that, as I understand it, is the test for whether she is eligible. I suppose once that application is made and (hopefully) her passport issued, I can apply for the free $$.


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## Nononymous

Assuming you meet the criteria - 5 years lived in the US, 2 of which after the age of 14 or something like that - then you have passed on US citizenship to your daughter. The US regards her as a citizen, or it will once it learns of her existence. You can go "claim" that citizenship for her by registering her birth and applying for a passport. However, doing this could mean a lifetime of tax reporting obligations for her, should she not choose to renounce. Not a step I would take lightly. Your daughter is very lucky in that she does not have a US birthplace, so if she stays off the radar, she can live without the taint of US citizenship - she can easily remain non-compliant without fear of FATCA because banks will never know that one parent was a US citizen, and so on.

I have a daughter, 15, born in Europe, for whom I (foolishly in retrospect) obtained a US passport before we returned to Canada. I wish I hadn't, because it means she's on file somewhere, but without the US birthplace she won't have any banking problems and should be able to ignore the citizenship unless she later in life decides to move to the US, in which case I suppose it could have its uses.

I find it interesting that you got the tax question at LAX, but they didn't ask if your daughter was a US citizen, because they could require her to enter the US on a US passport. That's the law, albeit rarely enforced. 

I won't give you direct advice on what you should do, as it may ultimately not be much of a burden to file some ballpark-estimate tax paperwork every year that proves you owe nothing. Your daughter may also be terribly keen on moving the US. Ultimately, you may need to be more careful than I about remaining cheekily non-compliant because you're not an Australian citizen; you likely won't have the same protections I do as a Canadian living in Canada (the US can fine me six ways to Sunday but it can't collect a dollar in penalties because my assets are here and it has neither the right nor ability to touch them). 

But for now, despite the question from customs, and the hypothetical threat of fines for not filling FinCEN reports, you're probably okay to ignore this for a while longer, take your time and decide on the best course of action for both you and your daughter. You should also run a calculation to see if Uncle Sam will actually give you free money for her, and if so, whether a few thousand dollars is worth her being put on the IRS radar for the rest of her days.


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## BBCWatcher

Nononymous said:


> ....The US regards her as a citizen, or it will once it learns of her existence.


If she is legally a U.S. citizen....



> However, doing this could mean a lifetime of tax reporting obligations for her, should she not choose to renounce.


....then this set of legal obligations already exists whether she is documented or not.

As I've said many times, an adult's hangups and political views are not a child's, at least not by default.



> ....unless she later in life decides to move to the US, in which case I suppose it could have its uses.


Gee, you think?

I my view this is not a close call. Document your children's citizenships. If your child wants to renounce his/her citizenship(s) on his/her 18th birthday, let him/her decide, as an adult. Offer to pay his/her $2350 fee if you wish. And if there's free money you're entitled to receive, take it. No child deserves to be born hiding from the law unless there's a *damn* good reason, and this certainly isn't one.


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## maz57

BBCWatcher said:


> I my view this is not a close call. Document your children's citizenships. If your child wants to renounce his/her citizenship(s) on his/her 18th birthday, let him/her decide, as an adult. Offer to pay his/her $2350 fee if you wish. And if there's free money you're entitled to receive, take it. No child deserves to be born hiding from the law unless there's a *damn* good reason, and this certainly isn't one.


Most kids don't have tax obligations to any government, let alone the US government if they are born outside the US halfway around the world. The kids of US parents may or may not be US citizens if they are born abroad; the rules are complicated and have changed over time. The notion that such children would be somehow hiding from the law is ridiculous. Not even the US government has that kind of extra-territorial reach.

While it might be a good idea to research the details to determine whether or not the kids are, in fact, US citizens, my advice would be to take no action for the time being. If and when the youngsters decide they'd like to travel, study, or live in the US, they can claim that citizenship when the time comes. But don't burden them with a lifetime of US tax filing obligations before they have a chance to decide for themselves. Its not like its a time sensitive offer which is going to expire. 

That so-called free money is anything but free. US citizenship comes with a cost and that cost is increasing over time. Heck, in some countries US citizens find it difficult to even get a simple bank account. The way the US citizenship renunciation process is evolving, it will likely be far more expensive or even impossible by the time the kids come of age. The US has a proven track record of punishing those who decide US citizenship isn't for them. Even now many find it un-affordable or impossible to get an appointment. Those kids have an opportunity to live happy, unencumbered lives in Australia (or practically anywhere else for that matter). If they later want to jump into the US frying pan, let it be their own decision. US citizenship is pretty handy for those who wish to live in the US; for those who don't wish to live there its a royal PITA.


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## Bevdeforges

The entry process seems to be evolving in the US. Used to be if you tried to enter the US on a different passport, you'd get a "stern lecture" about the rules and then after swearing you didn't know and swearing you'd sort the matter out before your next visit, you'd be on your way. Similarly, I used to insist on going through the non-citizens line with my husband when returning to the country. They didn't really like it, but basically said "OK."

Lately, though, the daughter of a friend of mine got hauled off to the "interrogation room" when an Immigration agent noticed her US place of birth. Spent an hour in there while her mother fretted outside waiting for her. 

There have long been threats that somehow the IRS would link up the entry records with their tax records and that you could have problems if you visited the US when you hadn't filed taxes in the immediately prior years - but unless you've got a warrant out for your arrest or have had other prior communication with the IRS over your tax status, that seems to be just the rumor they'd like you to believe. Officially speaking, the various departments in government aren't supposed to be able to "share" information like that.

One consideration, though. If you're going full out for the "free money" refunds when you file, that will earn you a few points in your IRS evaluation. They select returns for audit based on a point system and filing solely or primarily to collect some benefit does raise a few flags and certainly elevates your profile on their screens. Whether there is enough other stuff on your returns to warrant them looking into your situation is anyone's guess.

To get into compliance, be scrupulous about reporting any US source income and (these days) anything bank-related, and for other income from outside the US, give it a good faith estimate to "prove" that you don't owe any tax on that. Hang onto whatever forms or figures you used to put your returns together. That way if a question comes up, you can explain your calculations/thinking and show your good intentions. 
Cheers,
Bev


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## iota2014

I worried a lot about my (now-adult) children when I first found out about CBT and FATCA last summer. I was concerned that by registering them at the Embassy, and taking them to the US on US passports occasionally, I might have condemned them to lifelong US tax returns. But they withered their aged parent with scorn when I expressed my anxieties, and they were right - they're just not visible as US citizens, they don't feel themselves to be US citizens, and they couldn't in fact prove themselves to be US citizens, as they don't now possess the necessary documentation. So I quit worrying about it, and concentrated on sorting out my own position.

Basically - three options - comply, ignore, or renounce. Different choices will suit different people. I chose to renounce, did so, and did the backfiling (admittedly very easy in my case - blessed are the poor, saith the lord  ) 

Take some time to think before you decide - good advice I was given so I pass it on.


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## Nononymous

BBCWatcher said:


> If she is legally a U.S. citizen... ...then this set of legal obligations already exists whether she is documented or not.


Yes of course, but if a child was born outside of the US and never registered that birth with the US authorities, or obtained a US passport, then really they could merrily ignore their US citizenship for the rest of their days. They could even travel (sans parents perhaps) to the US on their foreign passport with none being the wiser.

However, signing the kids up for free money does make sense as long as you earn more than $2350 per person!

While I'm relieved that my daughter wasn't born in the US, I am slightly concerned that she'll one day hit a match on some customs database due to my having acquired a passport for her as a baby. She is likely the only Firstname Middlename Lastname born in City, Country on DD/MM/YY. But what I remember is a couple of paper forms handed back and forth at a consulate in Europe 15 years ago, I wouldn't be surprised if there's no electronic record, at least for now.

Regarding compliance, I ran into an old friend today, we were talking about our daughters' eventual university plans. He's American, naturalized many years ago, and recently sent his son to school in the states. He didn't think the odds of getting financial aid were worth the hassle of filing tax returns, which he hadn't done for a decade. He said that when he figured this out he actually called the IRS, and someone on the phone said "if you don't owe us any money, we don't really care, we're not going to come looking for you." I find that reassuring.


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## BBCWatcher

Nononymous said:


> Yes of course, but if a child was born outside of the US and never registered that birth with the US authorities, or obtained a US passport, then really they could merrily ignore their US citizenship for the rest of their days.


Under our present and past assumptions about government data handling and levels of curiosity, yes, it might be possible for your child to violate U.S. laws. My view is that's a lot of unnecessary baggage to saddle a child with, also bearing in mind it's bureaucratically complicated (or perhaps even impossible) for an adult to get properly documented. So if my (future) 18 year old asks for $2350 and a bus ticket to the embassy, fine. But I'm getting my kids' citizenship(s) documented. Views may vary, but I'm not going to saddle my children with _any_ baggage, including latent criminality, if I can possibly avoid it. And I can, easily.

I also can't promise that "Big Data" won't require adjusting our assumptions, even fairly soon.



> However, signing the kids up for free money does make sense as long as you earn more than $2350 per person!


The Additional Child Tax Credit is ordinarily worth ~$17,000 per child under reasonable assumptions, and assuming you qualify for it. So yes, that math works. (Even if you don't qualify for the ACTC other math can work.) However, in my view such math is not a requirement. Documented U.S. citizenship has contingent value that is easily worth at least $2350, in my view. No matter what my adult hangups (and I have some), objectively it's one of the world's most valuable citizenships -- there's no serious argument otherwise. It's prudent, responsible parenting to protect that contingent value (and avoid even a latent criminal record) for my children, in my view.

This isn't a close call in my view. I'm not going to f**k over my child's potential future as a Broadway star, a Silicon Valley billionaire, a U.S. Senator, to hike the Grand Canyon for as long as he/she wants, or whatever, because I'm afraid (or too cheap?) he/she might ask me for $2350 and a bus ticket, whether or not I get more than the $2350 in tax savings. (I do, as it happens, but that's not a critical factor in my view.) I'll work hard to keep all reasonable options open for my children, and $2350 is a very reasonable price to provide that particular option (large set of options actually), in my view.


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## maz57

Just shows how opinions differ. Iota has got it right.....think long and hard before deciding.


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## epsc

All sage advice. I will contemplate!


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## Nononymous

maz57 said:


> Just shows how opinions differ. Iota has got it right.....think long and hard before deciding.


Think up to 18 years before deciding.


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## Nononymous

I can't remember where exactly I saw this, I think some sort of expat blog run by Forbes, but someone had done some calculations, made some estimates, and over the past few years detected a significant drop in the number of births abroad being registered by Americans. A bit of diligent googling will likely find the story. Based on some interviews, it seemed to be permanent expats wanting to spare their foreign-born, foreign-citizen children the future complications of US tax reporting and compliance, banking hassles, the usual suspects. Take it for what it's worth, but interesting all the same.

The cynical have-your-cake-and-eat-it-too position, of course, is that if I keep my kid off the US radar by not declaring the birth, he or she can live unmolested. But then if they do in fact want to take advantage of US citizenship, well it's just a bit of bureaucracy to get it all sorted. I expect that acquiring a passport costs considerably less than the $2350 you'd spend to get rid of one, so you'll come out ahead this way, if your parents didn't qualify for $17k of course.

Not super worried that my daughter is a criminal, by the way. She'd not be obliged to file anything so what's she done wrong? Oh, right, the US could probably seize most of the tax-sheltered education savings fund my parents set up for her, assuming they knew about it...


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## BBCWatcher

Let's run the current numbers, shall we? It costs....

$100 for a U.S. Consular Report of Birth Abroad
$2350 for a U.S. Certificate of Loss of Nationality

Total fees: $2450. There's also the costs associated with a couple visits to a U.S. embassy or consulate for these purposes. That translates into $136.11 per year for 18 years. Call it $140 to add in a bit of travel cost.

Please note that every day you wait to document a child's derivative citizenship (U.S. or other) is a day of mortality and incapacity risk -- yours. It at least gets more difficult to document a child's citizenship if you're gone, mentally or physically.

OK, so is $140 per year a too high price to pay to document one of the world's most valuable citizenships (objectively) for your child _even if that child, on his/her 18th birthday (or at some point thereafter), decides to terminate that citizenship of his/her own free will_? In my view, clearly not, and I don't think it's a close call. I'm not including any of your potential or actual tax savings here that can often make a child's documented U.S. citizenship a money maker. That $140/year is the full, current price under reasonable assumptions.

It's a no brainer in my view! Document your children's citizenship(s) as quickly as you reasonably can after they're born.


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## Nononymous

Well clearly plenty of parents outside the US disagree.

There's a strange tension here, between your claim that through inaction one could make it nearly impossible for one's foreign-born child to claim their US citizenship, while at the same time worrying that the US would consider them criminals for not meeting their tax reporting obligations. Rather neatly sums up the surreal nature of this whole situation.


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## BBCWatcher

Read up on the plight of de facto (and also sometimes de jure) stateless individuals and DREAMers, as examples. It is most surreal -- and heartbreaking. 

There are also parents who don't vaccinate their kids against measles and with no reasonable (or even unreasonable) medical reason to skip their vaccinations. They are wacky in a harmful way. There's nothing wrong with being wacky _on your own_. But don't f**k up your kids -- one of whom could become the next Lady Gaga or Mark Zuckerberg! -- if you can possibly avoid it, please. Documented U.S. citizenship is not some toxic childhood disease. That's just nuts, sorry. In my view.

There are plenty of ways wacky parents harm their children, unfortunately. In the spirit of full disclosure, I'm also not in favor of religious indoctrination, removing parts of private parts, or several other wacky things some parents do to their children. I try mightily to separate my own prejudices and hangups from what's in the reasoned, considered, best interests of children. Unless dealing with a citizenship that truly is toxic by any reasonable definition -- think Nazi Germany in 1944 and a young male child, to pick an example (and in specific circumstances) -- every child has a right to his/her identities, in my view. So spend the hundred bucks, put $2350 in the bank (or under a mattress), and let the child decide for him/herself whether he/she wants to keep one of the world's most valuable citizenships. This isn't a tough call, truly, rationally.


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## Bevdeforges

OK, boys and girls, let's dial it back a bit.

Not all decisions in life come down to dollars and cents (or euros and centimes - or whatever). And, as the IRS told Nononymous (or whoever), if someone doesn't owe anything, the IRS is certainly not likely to come looking for them - especially overseas. They have actual criminals and tax evaders to chase, and a much limited budget to use to do so. (One of the presidential candidates is even talking about doing away with the IRS altogether if he is elected, which could resolve all sorts of problems, at least for us expats.)

We've given the OP our various assessments of the strategies open to him/her, along with the assessed risks and rewards. Our job here is done.
Cheers,
Bev


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