# Back Taxes as an Expat, crazy to attempt myself?



## EFAnne (Oct 13, 2012)

After having lived in France and the UK for the past 5 years, I have now moved back to the US. I have just realized that I have made the serious mistake of not filing taxes abroad because I misunderstood the law. I thought that the foreign income exclusion meant that I did not need to file unless I made that amount. I am usually a bright and organized person, but I seriously dropped the ball here. On the bright side, I have been filing FBARS. 

That being said, I am thinking about filing the back taxes on my own using TaxAct or similar software. I feel like I can gather an understanding of what needs to be done with research and hard work, as there are many resources. My situation is not complex, for 2.5 years I was unemployed and my non-US spouse supported me (in France), and for 2.5 years I was an employee (in the UK) and made less than $90,000/ yr. 

My questions are as follows:
1) Is it a mistake to attempt to do this on my own? 
2) Does anyone have an idea of what penalties I can expect, as do not think I should owe any back taxes, as I was either not-earning or making less than the foreign exclusion.

I want to tackle this in the lest expensive way possible, but I also want to use the opportunity to educate myself about tax and tax law, as clearly my head was in the clouds.


----------



## jbr439 (Nov 17, 2013)

Your situation can get complicated if you held non-US domiciled mutual funds or ETFs (considered to be PFICs), or you had foreign trusts. The US takes an expansive view of foreign trusts and an ISA, for example, may or may not be one.
See: Is an ISA a foreign trust?

Other than those, look out for things that are taxed by the US, but not by your host country; e.g. ISA earnings, lottery winnings, sale of principal residence (see Boris Johnson).

If you have no non-US domiciled mutual funds/ETFs, and no foreign trusts, then the tax return paperwork, at least, shouldn't be too bad.


----------



## ForeignBody (Oct 20, 2011)

You should consider using the Streamlined Procedures which provide protection from penalties for people in your situation. See: https://www.irs.gov/Individuals/Int...-Taxpayers-Residing-Outside-the-United-States

I agree with JBR439, if you have none of those "nasties" doing it yourself is realistic.


----------



## EFAnne (Oct 13, 2012)

Thanks. I didn't have any mutual funds and I actually had to google what an ETF was ;-) Clearly, I am a whiz with finances.

Thats such a relief about the Streamlined Procedures- I will do that for the past 3 years which were the only years where I was actually working, so that works out really well for me. 

Do I also need to file for the two years prior to that where I was not working and my non US spouse was the earner? 

Thanks for this information, I feel much more confident that I can tackle this myself and not end up in on the IRSs most wanted list.


----------



## BBCWatcher (Dec 28, 2012)

The penalty for non-filing if you genuinely owe(d) zero U.S. tax is zero. From your description you could consider just skipping filing altogether since it appears there's no U.S. tax owed. If you wan to file I would not recommend the Streamlined Program if you'd now fall into the domestic version of that program. Ordinary late filing would be better in your case if you genuinely owe(d) zero U.S. tax.


----------



## EFAnne (Oct 13, 2012)

Thanks for that. I am not sure why you say I would fall into the domestic version, as I was living abroad. Just to clarify, here is what I think you are recommending for the past 5 years where I didn't file. 

2011- not working, living abroad = No need to file as do not owe
2012- not working, living abroad = No need to file as do not owe
2013- working, living abroad = Need to file via Streamlined Program
2014 -working, living abroad = Need to file via Streamlined Program
2015-working, living abroad until October = Need to file via Streamlined Program


----------



## iota2014 (Jul 30, 2015)

The Streamlined Procedure requires filing for "...each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed." 

The due date for 2015 hasn't passed, so you perhaps shouldn't include 2015 in the Streamlined batch. You could instead file Streamlined for 2012, 2013, and 2014 - even if you didn't actually need to file in 2012. And then file normally for 2015 when it falls due.


----------



## EFAnne (Oct 13, 2012)

Thanks, that is really clear. I will do this and let you know how it goes.


----------



## BBCWatcher (Dec 28, 2012)

EFAnne said:


> I am not sure why you say I would fall into the domestic version, as I was living abroad.


I didn't. I wrote that I would not recommend the Streamlined Program in your case *IF* it would be the domestic version.

You don't actually need any relief from the Streamlined Program if you timely and accurately filed your FBARs (as you say you did) and, I would add, IRS Form 3520 (if applicable), and you genuinely owed zero U.S. tax for the years when you didn't file. I suppose it doesn't hurt to ask for relief from zero penalties, but you very much don't want to be classed into the domestic version of the Streamlined Program. If there's any risk you would be, then ordinary late filing would be better.


----------



## EFAnne (Oct 13, 2012)

Thanks for that response. 

I looked back at the Streamlined Program requirements, which state:

" Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days."

So if I use this to file 2012, 2013, 2014 I will meet this criteria. I will not meet this for 2015, and as you state, the deadline for that has not passed so I will just file normally for that. 

I worked in 2013 and 2014, but I did not make more than the foreign income allowance, therefore I assume that I will not owe any taxes, but I understand that I still need to file. This was was confused me and caused me not to file in the first place, I thought that because I made under the foreign income allowance I did not need to file, but since I made more than the ten grand or so no-filing limit, I now understand that I did need to file (although I would unlikely owe anything). Is this your understanding as well?


----------



## BBCWatcher (Dec 28, 2012)

You were obliged to file a tax return if you met the filing threshold, but the penalty for not filing if you genuinely owed zero U.S. tax is zero.

The only reason to file in that case is to start the statute of limitations clock just in case you're wrong.


----------

