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I'm 26 and have lived outside the U.S. all my life. I never filed a U.S. income tax return. I know nothing about doing my taxes, and would like to file for the years that I neglected to before the penalties become more serious. Here are some questions I have:

  1. What exactly are the penalties, if any, for not declaring my income in the past 6 years?

  2. How do I file for all the years that I didn't?

  3. Can I do this myself or should I get a professional to help out?

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  • "have lived outside the U.S. all my life" - How are you a citizen if you never lived in the US?
    – JTP - Apologise to Monica ♦
    Jan 22 '15 at 22:10
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    @JoeTaxpayer Perhaps OP was born to US citizen parents abroad.
    – dg99
    Jan 22 '15 at 23:00
  • @dg99 - I am completely out of my element. You can be born overseas, never set foot here, but have tax obligations to US? Just learned something new today.
    – JTP - Apologise to Monica ♦
    Jan 22 '15 at 23:03
  • Yes. :( The only way to not even potentially owe tax to the United States during year X is to BOTH (a) not be a citizen during year X AND (b) not earn any income within the United States during year X.
    – dg99
    Jan 22 '15 at 23:08
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Do NOT talk to the IRS on your own. Get a EA/CPA licensed in the US and operating in your home country to help you catch up. US embassies have lists of some of those, check the embassy in your country.

The penalties for US citizens living abroad are DRACONIAN. Where a US resident would get a slap on the wrist - you may be driven bankrupt and thrown into jail (if you ever set foot in the US). You can get a $100000 penalty each year for each bank account you own (even though you may not be liable for any taxes at all) just for not reporting it to the US government.

Being a US citizen and not living in the US is essentially a punishable offense through the tax laws. be aware of it and prepare to handle it as such.

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Sorry to say that I disagree with both of the previous answers to this question. I came up against a lot of similar "advice" when I was dealing with this issue personally. I know this is an old-ish question but hopefully this will help future searchers.

  1. (Added) The foreign income exclusion is currently $90k per annum. If your income is lower than this you will owe no tax and this is a paperwork exercise.

  2. The statute of limitations for tax issues is 3 years. Therefore you will not need to file returns for more than the last 3 years.

  3. The IRS has a special program in place called Streamlined Filing to help non-resident, non-Filer U.S. Taxpayers become compliant. If your finances are fairly simple and your income is normal you should be able to complete this process yourself. http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures

  4. Although the potential penalties are draconian they are based on the willful misrepresentation and the amount of tax owed. Most filers in this circumstance have no tax owing so no penalties applicable in that case. Also, I suspect the cost of handling most foreign filings exceeds the revenue they bring in and the IRS is disinclined to delve deeply for those with modest incomes.

  5. "Specialist" US tax advisors for foreign resident US citizens are rare and therefore very expensive. Worse, their interests also conflict with yours, .i.e., the more years and forms they file for you the more they earn. Carefully consider your other options before spending thousands of dollars on one of them.

My final piece of advice would be to refer primarily to IRS website for information and treat everything else you read as suspicious.

I haven't provided a lot of links to the IRS site because the IRS (in their wisdom) seem to change them fairly often. Many of mine have already aged out from last year. Google will take you where you need to go.

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  • 3
    "The statute of limitations for tax issues is 3 years. Therefore you will not need to file returns for more than the last 3 years." This is wrong. The statute of limitations means the IRS has 3 years after you file your return to audit your taxes. If you never file your return, the statute of limitations never even starts.
    – user102008
    Jan 22 '15 at 21:33
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    @JoeTaxpayer Note the reference to "willful conduct", most foreign resident non-filers are not aware of the filing requirement. Largely because the US is the only western country that requires it.
    – Joe Harris
    Jan 23 '15 at 14:07
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    Not sure why this is getting downvoted. It's very insightful and based on JH's personal experience. This is the best answer to the OP's question, thanks for coming back to an old question.
    – Rocky
    Jan 23 '15 at 16:53
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    @littleadv Professional advice on these cases (if you can even find it) is easily 5-10% of the median gross income in Western European countries (I know first hand) and anyone earning at that level would owe nothing and face no penalties. The IRS has clearly recognised that many people are simply not aware of the filing requirement and wish to become compliant. Unless you can cite specific instances where foreign resident citizens with modest incomes were penalised by the IRS (which don't exist, I looked) then your comments are less than helpful.
    – Joe Harris
    Jan 28 '15 at 1:14
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    @littleadv Very interesting, someone with an undeclared $42 million dollars should definitely "lawyer up". However it doesn't really serve as an object lesson for the rest of us with more meagre savings and income far under the caps.
    – Joe Harris
    Jan 28 '15 at 14:58
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  1. Where you live doesn't matter to IRS. So the same penalties apply.

2, 3. Get professional help in filing the taxes for the past few years to get you up to speed to current

Here are the details from the IRS website

Also here is IRS phone number aimed at assisting taxpayers

800-829-1040
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