Why American Expats Abroad Still Need To File Tax Returns

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The United States government is one of the few governments in the world that hold their expats liable to pay income taxes. There are certain exclusions, like the foreign earned income exclusion of up to $100,000, but citizens are always required to file. Even if you owe nothing, failing to file may accrue penalties that can ruin your financial life. The IRS is very influential around the world, so it is difficult to hide from the consequences.

 

The IRS Can Now Confiscate Passports

The “Fixing America‚Äôs Surface Transportation Act, or “FAST Act” that was passed in December of 2015 had a secret provision that extends the power of the IRS. The IRS may now work with the State Department for individuals that severely tax delinquent and the State Department may decide to suspend or deny passport applications. The threshold to consider one tax delinquent is currently set at $50,000 or more owed. Considering fines and interest, it may not be difficult to accrue such a tax bill by ignoring the IRS.

 

It May Be A Criminal Offence To Have Foreign Bank Accounts

The OVDI is an initiative by the IRS to prevent American citizens from hiding money in foreign bank accounts. Unfortunately, even the modest expats can unknowingly get into trouble by holding their savings. Accounts over $10,000 in value must be reported to the IRS using the TD F 90-22.1 form. If expats fail to report such accounts, penalties of up to $10,000 per violation and potential criminal charges if necessary.

 

Digital Nomads Owe Taxes Too

Digital nomads travel the world whilst earning money out of their laptops. Seemingly, they are off the radar of the IRS, but the government is now looking into the tax records of these individuals. With FATCA, a digital nomad setting up overseas bank accounts and companies are completely within the view of the IRS. Working online with American-based companies may also produce a trail of W9 forms since employers are obligated to send a copy to the IRS as well. If anything, digital nomads may be severely more red flags to the government rather than staying off the radar.

 

The IRS Can Collect Overseas

The IRS has tax treaties with a large number of countries around the world. With these treaties, the IRS may make cases for the severely delinquent taxpayer to confiscate their properties and bank account balances. Even if an expat is living in a country without such a treaty, it may be coming around the corner. Instead of trying to find tricky ways to hide wealth, it is a lot easier to just become compliant.

Contracting With The Experts At Universal Tax Professionals

Universal Tax Professionals are unlike other tax preparation services on the Internet. They are one of the few companies that specifically handle American expatriates living abroad and sorting out their tax liabilities. They specialize in keeping the expat up to date with past filings to they are now compliant with the infamous IRS. You may go to their website to get a free quote. Their services are set at flat rate fees without any surprises along the road.


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