Posted by susan,   2 replies

If I never lived in the u.s. and have world wide income am I exempt from filing u.s. returns. I was under the impression that there is an exemption.

2 replies

mark

Hi Susan. Great question. I think a lot of people are in your position and don’t know the answer. Sadly, the answer is a shock for many. I am not a tax prefessional, so I am just telling you my understanding. All US citizens worldwide (and with no distinction for having ever lived in USA or not) must FILE annual tax returns and report worldwide income. There are certain exclusions for SALARY earned overseas, which means you might not owe any tax, but you still need to FILE the right tax forms, and it’s complicated. BUT for Self Employed people there is NO exclusion on Schedule C (business) income. You must file the forms and tax IS due, whether you ever lived in USA or not. These can be filed late and penalties and interests paid.

Bigger problem is that if you had any foreign bank accounts with aggregate total over $10,000, just need to be filing FBAR forms, and no way to file late and BIG penalties for not filing, and they don’t care if you ever lived in USA or not. Good luck.

Deen

The USA is making agreements with banks in many countries to hand over expat information. Some banks are freezing accounts in countries such as Canada until all tax forms and information is submitted to the IRS. This includes anyone who has American citizenship whether by birth in the USA or if American parents have applied for children. There are also people who are “of USA interest” just because they purchased a property in States, will inheret money from an American etc. Even if you left as a baby and have never worked in that country you are still obligated to file tax forms and give all your out of country bank and income details. Do not take this lightly as there are heavy penalties for not complying. We were warned years ago from an Australian International Banker that this would all come to pass. Boy was he on the mark.