The US is one of the few countries to tax their citizens not on their US residency status but on their citizenship. The IRS and US government are proactively trying to identify individuals where they think a filing obligation exists.
So how do I know whether I need to file a US Tax Return?
Regardless of where you currently reside – whether that’s in the US or in a foreign country – if you are a US citizen or Green Card holder, you are required to file an annual US tax return with the IRS.
Every day we speak to clients that are unaware of their obligation to file and they generally fall in to one of the following five categories:
- You were born a dual US citizen and you have had little or no interaction with the US
- You have lived outside the US for a prolonged period of time
- You hold a Green Card
- You have recently started an assignment in the US and you had no prior requirement to file
- You have been receiving US tax services as part of your assignment, but your company no longer provides this service
What are the implications of filing?
As well as the obvious tax consequences of filing, the administrative burden and penalties that can apply also need to be considered.
Regardless of the level of your US sourced income – which may indeed be none – or whether you owe minimal or no US tax on completion of your return, you are still required to file a return.
Further to your tax return filing obligation, there are various other forms that a US citizen may be required to file. Many of these forms do not relate to tax liabilities, but rather aim to report your personal and financial affairs to the IRS. One of the most common of these is the Report of Foreign Bank Account. For more information about this form, please click here.
Finally, there can be hefty penalties and interest for non-compliance. Many of the penalty regimes being compliance and not tax based.
Who we are and what services we can provide?
Tax Advisory Partnership is a London based firm offering US and UK tax advice, compliance and consultancy services. We specialise in serving citizens from all over the world and have a talented team whose business it is to advise on tax compliance matters that have an international element.
Please click on the following areas to discover more about how we can help:
- Identify US compliance and filing requirements
- Manage the timing of UK and US tax payments and other foreign tax credit planning
- Cross-border pension planning
- Identifying taxing rights and planning opportunities under the UK/US double tax treaties
- Estate tax planning in light of the UK inheritance and US gift & estate tax regimes