Fines for late tax returns?

[LauraDP 10]

My husband (who is the USC) was - until we started looking into emigrating - ignorant of the fact that, as a USC, he was obliged to file annual tax returns with the IRS. He left the US when he was 16 and had never been in paid employment so he had never had to fill out a tax return in order to be made aware of this fact. His working life has always been here in the UK so this is where he has been paying tax. Realising his mistake he has filled out returns for the past three years (having asked for an extension for this current one) and is about to submit them via the IRS office attached to the London Embassy. Needless to say, he has never actually been liable to pay any tax to the US so we are not due the IRS anything. He has enclosed a covering letter explaining the circumstances.

My worry is that we are going to be walloped with a fine for not submitting the returns for all of these years. That could be 20 years' worth of fines. I noted with rising panic that there is no statute of limitations when it comes to late filing. If we are fined for all those previous years then we have no money with which to fund our emigration to the US so it puts paid to our dream to relocate.

My question, therefore, is - Has anyone on here made a similar error and, if so, were you fined?

Thanks in advance for your responses.

Laura

[Married2009 32]

If you don't owe anything, there shouldn't be a fine or penality.

[LauraDP 10]

If you don't owe anything, there shouldn't be a fine or penality.

Thanks for your prompt reply. That is hugely reassuring. I was worried, anxious, stressed, panicked that there might be a fixed financial penalty for not submitting the paperwork even though nothing is owed and never has been.

Cheers

Laura

[Dave&Roza 748]

My husband (who is the USC) was - until we started looking into emigrating - ignorant of the fact that, as a USC, he was obliged to file annual tax returns with the IRS. He left the US when he was 16 and had never been in paid employment so he had never had to fill out a tax return in order to be made aware of this fact. His working life has always been here in the UK so this is where he has been paying tax. Realising his mistake he has filled out returns for the past three years (having asked for an extension for this current one) and is about to submit them via the IRS office attached to the London Embassy. Needless to say, he has never actually been liable to pay any tax to the US so we are not due the IRS anything. He has enclosed a covering letter explaining the circumstances.

My worry is that we are going to be walloped with a fine for not submitting the returns for all of these years. That could be 20 years' worth of fines. I noted with rising panic that there is no statute of limitations when it comes to late filing. If we are fined for all those previous years then we have no money with which to fund our emigration to the US so it puts paid to our dream to relocate.

My question, therefore, is - Has anyone on here made a similar error and, if so, were you fined?

Thanks in advance for your responses.

Laura

Since his income is in a foreign country he can take the foreign tax credit along with the standard deduction. You can check all the amounts out on the IRS website, but unless he made a lot of money per year, he will not owe any taxes. No taxes owed no interest and penalities. I see you are aware that they can go back to the age of 18 and check his tax file. You might want to show proof of when he left the US just to stop the IRS from doing so and avoid that headache. They should see that he did not owe any US taxes in the last three years and he left when he was 16 so he is good to go.

Good luck,

Dave

Edited August 3, 2012 by Dave&Roza

[rin and john 71]

http://www.irs.gov/newsroom/article/0,,id=205326,00.html

From the link above, failure to file carries the lesser of $135 or the unpaid tax. If the unpaid tax is $0, your husband will not be hit with a penalty.

The foreign earned income exclusion is limited in 2011 to $92,900 (this value is adjusted up slightly each year to account for inflation). So if your husband had earned income less than $92,900 in 2011, then his tax would have been $0. This exclusion only applies to "earned" income. Investment income, gambling winnings, etc (anything the IRS considers "unearned") are not excluded and your husband would owe tax on these. However, he can receive a foreign tax credit if he paid taxes in a foreign country.

Info on the exclusion and foreign earned income definition can be found here:

http://www.irs.gov/publications/p54/ch04.html#en_US_2011_publink100047499

Info on the foreign tax credit can be found here:

http://www.irs.gov/taxtopics/tc856.html

[Anh map 2,098]

Just file tax returns for the last 3 years, not the entire time period. The most recent 3 are what is relevant to the immigration process.

[rin and john 71]

Just file tax returns for the last 3 years, not the entire time period. The most recent 3 are what is relevant to the immigration process.

This is only valid if he does not owe anything for the previous years. If it is discovered he owes the IRS money (doesn't matter if it is from ten years ago), his spouse's visa will not be approved (until he shows proof of the debt being paid or an IRS approved payment plan). There have been more than one VJ member who has run up against this.

[justashooter 430]

the foreign tax exclusion is given in the understanding that the country you are earning in is taxing you.

lots of people use it for "scot free" money, and pay no tax to either USA or the host country.

they are lawbreakers, pure and simple.

[Anh map 2,098]

This is only valid if he does not owe anything for the previous years. If it is discovered he owes the IRS money (doesn't matter if it is from ten years ago), his spouse's visa will not be approved (until he shows proof of the debt being paid or an IRS approved payment plan). There have been more than one VJ member who has run up against this.

Correct.

In this instance the USC hasn't filed any returns for 20 years. USCIS isn't likely to be concerned with that time period. And it's unlikely that the USC would hit the IRS radar before the visa is issued, if at all.

[LauraDP 10]

http://www.irs.gov/newsroom/article/0,,id=205326,00.html

From the link above, failure to file carries the lesser of $135 or the unpaid tax. If the unpaid tax is $0, your husband will not be hit with a penalty.

The foreign earned income exclusion is limited in 2011 to $92,900 (this value is adjusted up slightly each year to account for inflation). So if your husband had earned income less than $92,900 in 2011, then his tax would have been $0. This exclusion only applies to "earned" income. Investment income, gambling winnings, etc (anything the IRS considers "unearned") are not excluded and your husband would owe tax on these. However, he can receive a foreign tax credit if he paid taxes in a foreign country.

Info on the exclusion and foreign earned income definition can be found here:

http://www.irs.gov/publications/p54/ch04.html#en_US_2011_publink100047499

Info on the foreign tax credit can be found here:

http://www.irs.gov/taxtopics/tc856.html

Phew! My husband had actually printed off the documents from the IRS website that state that same information but had misread it. He thought it was a minimum of $135. That is a massive, massive relief. Thank you for clarifying that for me.

Just file tax returns for the last 3 years, not the entire time period. The most recent 3 are what is relevant to the immigration process.

Thanks for your reply. That is exactly what he has done. All the forms have been filled and I posted them off to Texas this morning. We knew he only had to file for the most recent three years but were concerned that because of his oversight they would delve into the past 20 years.

[LauraDP 10]

the foreign tax exclusion is given in the understanding that the country you are earning in is taxing you.

lots of people use it for "scot free" money, and pay no tax to either USA or the host country.

they are lawbreakers, pure and simple.

Agreed. I can assure you all that we have been paying tax in the UK as we should for our entire working lives. We simply had not know that Chris should have been filing annually with the US too. At least now I am feeling reassured that this should not prove to be a block or even much of a hindrance to our immigration plan.

You guys are awesome. Thanks so much for clarifying all of this for me and easing me out of my panic.

[himher 634]

Nonsense. We just got back from a 3 year hitch in Saudi. We paid no taxes in Saudi and got the full foreign income exemption. There is a line on the form for taxes paid to the other country and our line correctly said (zero).

We did not file our own taxes, PriceWaterHouse did. They were deducted every month, the W2's were reported back to the IRS at the end of the year, and we filed and received our refund every year.

The foreign income exclusion is allowed to everyone, regardless of where they live, who is a legal resident of a foreign country or who was out of the US for >330 days for any tax year. It has nothing to do with taxes to a host country. The foreign tax credit, by the way, is in ADDITION to the exclusion.

Hope that clears up this misconception.

To the OP: There is no penalty for late filing unless taxes are owed.

Our colleagues from the UK who were working in Saudi paid zero taxes to anyone. This is because the US and Libya are the only countries in the world who tax the income of their citizens when they are working overseas.

Your apology for calling me or my family lawbreakers is accepted.

the foreign tax exclusion is given in the understanding that the country you are earning in is taxing you.

lots of people use it for "scot free" money, and pay no tax to either USA or the host country.

they are lawbreakers, pure and simple.

Edited August 5, 2012 by himher

[LauraDP 10]

Nonsense. We just got back from a 3 year hitch in Saudi. We paid no taxes in Saudi and got the full foreign income exemption. There is a line on the form for taxes paid to the other country and our line correctly said (zero).

We did not file our own taxes, PriceWaterHouse did. They were deducted every month, the W2's were reported back to the IRS at the end of the year, and we filed and received our refund every year.

The foreign income exclusion is allowed to everyone, regardless of where they live, who is a legal resident of a foreign country or who was out of the US for >330 days for any tax year. It has nothing to do with taxes to a host country. The foreign tax credit, by the way, is in ADDITION to the exclusion.

Hope that clears up this misconception.

To the OP: There is no penalty for late filing unless taxes are owed.

Our colleagues from the UK who were working in Saudi paid zero taxes to anyone. This is because the US and Libya are the only countries in the world who tax the income of their citizens when they are working overseas.

Your apology for calling me or my family lawbreakers is accepted.

Hi Himher

I am sure that no one intended any offence. I know that I certainly did not. However, if anything I wrote did upset you then I do absolutely apologise. I think the reference to law-breaking related to anyone in my specific circumstances had myself and my husband not been paying tax in either the UK or the US.

Best wishes

Laura