OMG – Am I a US Taxpayer?

As we press to educate our elected representatives on how the injustice of US CBT affects all Australians, it is inevitable that some people will come to the unpleasant realisation that the term “US Taxpayer” may apply to them, that OMG moment that changes everything. The first reaction may be panic, or fear. Slow down, take a deep breath, and educate yourself! The absolute last thing you should do, if you are not currently compliant with US tax rules, is to hire a tax accountant. Once you hire a tax accountant you will be filing US tax returns, whether you actually need to or not. We are not suggesting that you break the law, but rather that you consider carefully how the law actually applies to your situation before taking action.

On this page we will collect links to sites that will help you work through your OMG moment and get to the other side. What that other side looks like depends on what is best for you, in your particular circumstances.

Start here: Must Read for US Persons in their OMG moment and Introductory Material

Then consider the Petros Principles – you’ll find links to all 12 here.

If you want to lose your US citizenship, take a look at the Renunciation and Relinquishment thread at The Isaac Brock Society.

If you want to file your US taxes, check out the expat tax thread at Isaac Brock, or the US Expat Tax Questions group on Facebook.

And look at all the links on our Other Sites page.

If you come upon any other resources that help you through, please share them in the comments.

17 thoughts on “OMG – Am I a US Taxpayer?”

  1. This is a very important post. The OMG moment (also referred to as “Oh My Gosh” moment) is usually terrifying and confusing. It’s extremely important that you take the time to objectively evaluate your situation. It’s also important to realize that many people are so upset by learning about U.S. citizenship-based taxation that they are NOT capable of a reasoned decision. Instead they react and that reaction often means simply following the advice of whatever professional they talk to. So, be careful. This can (and often does) lead to total disaster.

    Also, a couple of observations, based on many discussions with people over the years …

    1. Many people react by thinking that “they have done something wrong”. Nothing could be further from the truth. You have done nothing wrong. You were simply (if you are still a U.S. citizen) not aware of U.S. laws, that are so contrary to international norms, that many have a hard time believing that these laws even exist. You are NOT alone. You are in the company of millions of people.

    2. When people hear that they must file taxes, they automatically think that filing U.S. taxes is like filing taxes (which is what they understand) in their country of residence. Nothing could be further from the truth. The U.S. tax system is loaded with all kinds of #YouCantMakeThisUp rules that apply to people outside the United States. So, before you make a decision to file U.S. taxes or renounce U.S. citizenship (or whatever else you are considering), take the time to really understand how these U.S. rules would apply to your situation. Be particularly careful with the possible application of the S. 877A Exit Tax if you are considering renouncing.

    Finally, do NOT feel pressured. You have time do do your due diligence. Remember also, (as is stated in this post) that tax professionals can help you with ONLY one thing – filing taxes.

  2. my ” omg” moment only occured 2 months ago when i accidently clicked “americanabroad org”. i was trying to google a place for traditional thanksgiving dinner. since then, i have studied every day about the subject and re- examing my tax situation.

    i am a chinese american ( neutralized) and am married to a German. now, we live in a sleepy town of 12,000 population 30 km outside of frankfurt. i have been a housewife. my husband is shocked and terrified to know we could lose all the money we had worked so hard for….

    1. Hi china-america-germany – glad you found us here. Take a deep breath and relax. It is extremely unlikely that you’ll lose everything. Continue to research your situation. If you have no assets or other current connection to the US (other than your citizenship), it will be very difficult for the IRS to collect from your German assets. If you have been a housewife, then it is possible that you have no actual tax liability in the US – and the penalties for failure to file can be waived in streamline. If the IRS doesn’t know you exist, then they are unlikely to find you. Understanding the risks – and the likelihood of enforcement – is key. Check out the American Expatriates Facebook group (https://www.facebook.com/groups/AmericanExpatriates/) and/or the Isaac Brock Society (http://isaacbrocksociety.ca/). Both have several German residents participating. Isaac Brock can be difficult to navigate – try posting your questions in either of these threads: http://isaacbrocksociety.ca/renunciation/ or http://isaacbrocksociety.ca/expat_tax/

  3. Hi Karen, fellow Brisbane-based dual citizen, AU perm resident since 1999. In the process of starting to investgate applying for an immigration visa for my dual Auusie/British wife, have stumbled into this body of information… OMG moment may be putting it lightly, I think I’m going to be sick.

    I am trying to read through what I can, but is there anything you can offer immediately to help me know where to look. I have had no assets or income in the US since I left.

    Thanks

    1. Hi Garet, glad you found us. If you’re planning on returning to the US, then you’ll probably want to come into compliance. The streamlined program will allow you to come into compliance without penalties. You would have to file 3 years of tax returns and 6 years of FBARS and complete a statement explaining why you failed to file US returns (because you didn’t know it was required). There are a large number of compliance professionals out there who are advertising their services for this streamlined program. Their motivation is to collect fees both now and on an ongoing basis. It’s best to get a rough idea of what you may be up for before you actually contact a tax professional. If your income in Australia is mainly employment income plus super, then the returns should be simple and inexpensive to prepare.

      If you’re moving out of Australia and will no longer be a resident taxpayer here, then make sure you understand the Australian tax consequences of the move. There are new rules about CGT and principal residence that you need to be aware of. And any SMSF or discretionary trusts that you own will need Australian resident trustees (and will be a big headache on your US return).

      One last piece of advice – think about how your (and your wife’s) Australian assets will be taxed by the US once you move there. If that changes your decision about moving, then there’s really no rush to file any US returns.

  4. Hi Karen- wow so much to consider being a dual citizen! I’v been living in Australia for 10 years and only just recently set up a family trust in Australia. About to be paid a dividend but then came across your site and yes OMG! I have not filed anything regarding the trust before even though no prior dividends have been made. From what I could read I could be fined $10k+ per year of not filing!? Would these penalties be waived due to negligence in your experience or am I best to get out of the trust ASAP!?

    1. Hi Nicolle,
      I’m assuming you have been filing US tax returns. If that’s the case, you should be able to catch up on the trust filings without penalty. If the filing deadline for the year the trust was created has already passed, then the streamlined procedures would be appropriate. Get appropriate US tax advice before you make any changes in the trust.

      For those who are not up to date on US returns and who have no US assets, entering the US tax system might not be the best choice.

  5. My husband was born in the US and permanently moved to Australia when he was 7, he is now 49. He was contacted this week by our bank stating he needs to supply his SS number or provide evidence of relinquishing his US citizenship. We are completely stuck as to what to do, he contacted the Australian Tax Office and whilst they were lovely didn’t provide too much information on what to do.

    Where could we go from here?

    1. Hi Karen,
      Take time to consider all of your options before you act. Is your husband an Australian citizen? If so, is he certain that he has not lost his US citizenship in the past (perhaps by becoming an Australian citizen with the understanding that he would lose US citizenship, or by performing some other expatriating act)?

      I’m assuming that he has not been filing US tax returns. Giving an SSN to the bank does not mean that the IRS will start chasing him for US taxes. The IRS is swamped with data and does not have the computer systems necessary to mine the FATCA data they are receiving. And, even if they did, they don’t have enough information to determine whether your husband earns enough income to be required to file a US tax return – or how much his US tax liability might be. So don’t rush into compliance. Those who try to comply with US tax rules while living permanently in Australia often end up deciding that the cost of compliance (both in terms of accounting fees and limitations on investment) are not worth any benefit of retaining US citizenship.

      There are many resources linked in the post above. If you have questions, post them here or use the feedback form on our About page to get in touch.

      1. Hi Karen, thank you for your reply. My husband hasn’t lost his US citizenship and weirdly enough this all occurred after trying to renter the country on our honeymoon as they had said there was no evidence of him entering Australia. Although we did leave Aus for our honeymoon. This then ended him needing to obtain a visa to enter AUS. To apply for Aus passport he had to show evidence of his citizenship which he thought was dual citizenship and he was applying for a copy of this certificate which his parents never had. He had always flagged on applications he was American. Now our bank is saying it is going to shut down our account unless he gives his SSN etc. it seems ludicrous that he had never earned US dollars and this is affecting our bank. The bank cannot tell us if this is going to affect our joint home loan etc..

  6. My partner, who will become my husband at some stage (unless it’s really best not to!), was born in the US and spent 3 months there before returning to Canada, where he was supposed to be born (popped out early). He has Aus citizenship through his father, and has lived here since he was 2. But he did live in the US for 9 months as a teenager with his family, and has a current US passport, though he hasn’t even been there since 2003. He’s never earnt over AU$100,000/year, and is 38 now. And currently has no assets to speak of. But we are about to purchase some acres, which has been our dream for years, and that will be all our savings put into getting that. We are putting it under my name only, but will that help?
    Is this wise to do? Would getting married change anything? He would like to renounce to not have to worry about it anymore, but it’s not like we have a heap of money to throw away like that, and I’m scared that by trying to renounce he’ll have to do back tax returns and what that will lead to (high fees to file them for one), if he doesn’t have paperwork for every year that proves he never earnt over the threshold. I’ve said before to him that I think it’s best just not to do anything about it but he really likes to abide by the law, and not have to worry.

    1. Putting the land in your name is probably a good idea – especially if he plans on coming into compliance with US tax.

      You might also consider that the IRS does not recognise a de facto relationship as being married – which might also help if he plans on coming into compliance.

      There are two separate processes involved in getting rid of unwanted US citizenship. The citizenship side is done at the consulate (at a cost of USD2,350) – this will get you a Certificate of Loss of Nationality and remove all future US tax liability. They will inform you of your tax obligations, but they will not ask to see any proof that you are up to date. Therefore, it is entirely possible to renounce without tax compliance. The second process is exiting the US tax system properly – this involves five years of tax compliance and a possible exit tax (if you’re a “covered expatriate”). For most people living in Australia the main cost is the cost of having the US tax returns prepared, though some do end up owing some US tax. The main advantage to exiting the tax system properly is to avoid any exit tax (which the IRS would have difficulty computing or collecting from non-compliant ex-citizens) and to avoid an extra inheritance tax on any assets you leave to US taxpayers on your death.

      If he does want to come into compliance, the Streamlined procedure means that he only has to file 3 years of returns (5 if he’s planning on renouncing immediately). Before contacting an accountant, he should educate himself on the US tax system and make sure he understands what his US tax liability might be.

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