Any US citizens here who have worked overseas for a number of years and not paid taxes until you went home?

Question

As long as you make less than 60,000 a year you should be exempted from taxes. But I'm wondering if the IRS will try to penalize me for not filing every year. I'm thinking of filing now, I'm still overseas, but I don't want to start receiving letters stating that I have to pay penalties.
Anyone have any experience with this?

Answer 1

The IRS requests that you file just the past three years in this case, not every year. Your local Embassy will assist you in getting things sorted. If you owed a lot of money, however, they could ask for six years instead.

Quote from the IRS FAQ page of the US Embassy in London:

"I am a U.S. citizen who moved to the U.K. several (or many) years ago and thought I did not have to file U.S. tax returns any longer. Now I have learned that information was incorrect. What do I do?

"This is a common misunderstanding among Americans abroad, and should not create anxiety for those who find themselves in this situation. Generally, you should file returns for the past three years, taking the foreign earned income exclusion, the foreign tax credit, or both. It would be extremely unlikely that there would be any late penalties assessed, since penalties are computed as a percentage of tax owed, and only the rare taxpayer would actually owe tax in this situation.

"You may contact us for prior year tax forms, or download them from the IRS web site. To find older forms, enter the year required in the Search for... box on the top-left of the page. The search typically returns Forms and Publications for the year on which you will have searched."

You can also hire someone to prepare them for you and plead clemency from penalties, but it doesn't sound like your case warrants this cost. Visit the websites below for more info.

Answer 2

File a return for every year you missed. If you did not owe, there will be no penalty. Penalties are computed based on the amount owed. The statute of limitations for the IRS assessing taxes does not start until you fill. The longer you wait, the harder it could be to prove you don't owe. If you do owe, interest accumulates the longer you wait.

Answer 3

The limit is $80,000 and it applies only to earned income. If you have, for instance, investment income, that will be subject to tax in the normal way, without reference to the $80,000 limit. If you are in or near a large city, you will most likely be able to find an Enrolled Agent to file your taxes. A Non-resident return is not something you wish to tackle without the appropriate knowledge.