I live in Sweden and am an American Citizen. Do I need to file a return?

Question

I filed the first few years I was here, then a tax assistent at the embassy said it wasn't necessary if I made under the limit. Now I've had my own company for 3 years but still make WELL UNDER the limit of $80,000. Is there any point filing a return and if so do I need to file for previous years?

Answer 1

You are subject to US taxes regardless of where you live. The limit for a single filer (wages other than self-employment) is $8.450, NOT $80,000.

You may be able to exclude foreign earned income from US taxes IF you file a timely return. It's too late for last year or any prior years to claim that; the best you can do is to take a credit for foreign income taxes paid. Any benefit will likely be negated by the penalties and interest for late filing and possibly late payment of your taxes, though.

Get a copy of IRS Pub 54 from the IRS website. And get going on those back taxes! The IRS can and will attach foreign assets for unpaid taxes in many countries. Even where they can't, they can still seek redress in both the US and foreign courts.

Answer 2

First, your advice was incorrect. You are subject to the same filing requirements as any US citizen. If you made more than the minimum for your filing status, you were required to file a return. So, for the years you did not file, file a return to record that you had no tax due, assuming you made less than the foreign income exclusion.

Starting with 2006, the foreign income exclusion rules have changed, and you might owe some tax that you would not have owed under the old rules.

You will need to file a return for 2006, even if you will not owe tax.