# US citizen tax return first time filer



## JohnM4285 (Apr 26, 2021)

Good morning,
Glad I came across this forum. I would really appreciate some help or guidance on the following matter.
My friend will file her income tax return for the first time for 2020. She is a US citizen but qualifies as a bona fine resident since she lives abroad permanently and fulfills all other requirements of form 2555. She does not have any assets in the US. She will file her 1040 as ‘Married filing separately’ as her husband is an NRA. They have a joint bank account where they live and submitted FATCA information. She has one child with dual nationality (child has SSN). Her only income to report is from foreign employment (as a full-time employee), as well as some $15-20 interest per year from two bank savings accounts. The foreign earned income exclusion allowance of $107,600 would basically wipe-out her US tax liability as she earns a gross total of roughly $75,000.
Is it correct that she should only file forms 1040 and 2555? Are there any other schedules of form 1040 that she has to file? Does she need to attach supporting documents to form 1040 like her foreign income tax statement?
One final question. Since she will make use of the Streamlined Foreign Offshore Procedure (and attach years 2017,2018, 2019 +FBARs) to become tax compliant, will she file this concurrently with her 2020 tax return?

Your help is much appreciated. Thanks,
John


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## Moulard (Feb 3, 2017)

If she has never filed before some will argue (waves to Nononymous in particular) that she should just stay low and continue as is and stay outside the US tax system. If she outside the US, plans to stay outside the US, has no assets within the US there is some merit to this approach.

If one is going to enter the tax system "late" then yes, the Streamlined procedure is the way to do it as it removes the risk of penalties.

Married Filing Separately is the correct way to file, unless she is the primary earner in the family, in which case she may be eligible to file as Head of Household.

No need to attach supporting documents about foreign wages, the IRS just has to take it on trust that she is reporting her foreign wages correctly.

As she has foreign financial accounts, she may have to file FinCen Form 114 (aka the FBAR) and Form 8938 and will always have to file Schedule B and complete Part III.

Instead of Form 2555 and the Foreign Earned Income exclusion, if she lives in a higher taxing jurisdiction, she may actually want to file Form 1116 and claim foreign taxes paid or accrued to offset the US tax liability. Its a bit more complicated, but it does have the advantage that she can carryover excess foreign taxes for 10 years although it does mean she cannot use the FEIE

If she hasn't done so already, IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad provides a good overview


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## Nononymous (Jul 12, 2011)

Right, I shall weigh in. Why does your friend wish to enter the US tax system? If they are a dual citizen, there is no danger to their not doing so.

Reasons to file: (1) Free money - the stimulus benefit this year, and potential ongoing child tax credits. For the child tax credit I believe the FTC is required, so don't use the FEIE. (2) Makes life easier if there are future plans to move to the US. (3) US assets or possible future inheritance that includes US property.

Reasons not to file: (1) Pointless paperwork burden if nothing is owed; pointless sending money to a country one does not live in if something is in fact owed. (2) Certain types of investment that are normal in one's home country are a very bad idea if one is going to declare them and attempt proper tax compliance (see: PFIC). (3) If one has no US assets and another passport, the US government can't do much to hurt those who don't file.

Other things to consider. If your friend was not born in the US and has another passport, FATCA is super easy to avoid. In some countries (i.e. Canada) banks don't check place of birth so everyone can choose to avoid it. Depending on the country and bank, some investment services may not be offered to US citizens. Even if your friend decides to become compliant, they should be careful to keep balances in joint accounts low, and if they trust their spouse, have money invested in the spouse's name only.


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## JohnM4285 (Apr 26, 2021)

Hi Moulard and Nononymous,
Many thanks for your clear and extensive answers on the pros and cons of entering the US tax system. I understand that it is a decision based on personal circumstances. In this case, she only has US citizenship and FATCA/W9 paperwork has already been filed with the local banks. I haven’t mentioned that she is domiciled in Malta which is going through rather turbulent times politically as it is high on the US radar. This put aside, there might be the possibility of a future inheritance or she might decide to move back to the US. 
Just a quick follow-up questions if you don’t mind. If she decides to start the streamlined procedure, I understand that this paperwork will be sent to Austin, TX whereas the regular tax return (i.e. 2020) can be filed electronically. If it matters at all, which one should she submit first in your opinion? 

Thanks again for your help on this matter. Best,
John


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## Nononymous (Jul 12, 2011)

Sorry, can't provide any useful advice on the actual mechanics of filing. I'm the local non-compliance expert only.


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## Bevdeforges (Nov 16, 2007)

I've helped a couple friend file their Streamlined filings and generally what people seem to do is to file the current year first. You can file it electronically if you use a tax preparation software (particularly one of the Free File ones). You can also use the Free File fillable forms - but unless you're fairly familiar with doing the forms yourself this winds up being a hugely frustrating exercise. (The IRS online systems are generally speaking pretty awful.)

The three back year filings have to be on paper, filed together and include some extra markings and your "excuse form" on the top.


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