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 US law, but rather that you consider carefully how US 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.
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.
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….
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/
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
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.
Thank you so much for this feedback. We will consider and investigate.
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!?
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.
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?
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.
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..
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.
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.
Filing taxes with a government 10,000 miles away, where you have no ties or income from, is beyond absurd. It’s surreal nightmarish, and completely bonkers. Wait a sec and think about that! It’s not normal!
No one who holds dual citizenship should make a filing, much less pay anything. Get all your assets out of the US and NEVER file. If you have been filing, then STOP filing. There is not a damn thing they can or will do to you. Enough is enough. Expats, grow a pair, get over your anxiety and say NO to the bully. If you have too much irrational anxiety about it, see a therapist, doctor, but not a US tax accountant, or tax lawyer.
If you have banking problems, get your non-US citizen parent, brother, wife or someone to open an account for you in their name. These days, you almost never have to go to the branch and all banking is done online or by ATM. Problem solved, and skip the $2350 ransom fee. Go on, live free and happy just like you were never a US citizen.
My understanding is that per the tax treaties the US foisted on other countries if they wanted to continue to do business involving the US, the US has the right to freeze bank accounts,etc in countries that signed these tax treaties.
The banks in these countries that collected SSNs, etc of US citizens and Greencard holders had no choice under penalty of said treaties.
Prior to the fairly recent tax treaties involving exchange of information, the IRS had no means of knowing about these assets. Now that a list of names, SSNs, and assets is being provided to them, it makes it relatively easy for them to affect a person financially worldwide if they can legally under the tax treaty make the foreign bank freeze accounts, etc.
I am panicking over this tax situation. I am an Australian citizen living in the US for almost 18 years, who recently also became a US citizen. My American husband and I plan to move to Australia next year to spend some years there with family as my parents are aging. My husband has applied for a permanent partner visa for Australia. We don’t own anything in either country, the house we live in the US actually belongs to my Australian parents. While living in Australia we will both work full time. Someday in the future however, we plan on coming back to live in the US. As a dual citizen living in Australia, will I have to file for US taxes? Will I be double taxed?
Don’t Panic! (Douglas Adams was right). US tax law requires all US citizens to file annual tax returns regardless of where they live (as long as they meet the income thresholds for filing). Since you know about the filing requirements, you should be able to navigate the tax rules without too much hassle. The US will allow you a credit for taxes paid in Australia. Since Australian tax rates are generally higher than US tax rates, most expats end up owing little or no US tax. You will have to be careful what you invest in outside of the US (better to keep all of your investments in the US if you can). Be sure you find a qualified US tax preparer with experience preparing returns of US citizens living in Australia – they will be able to advise you on what to avoid. Once you’ve had the return done professionally once or twice, you should be able to prepare your own.
Hi Karen,
I am an Australia citizen who lived and worked in the US for 8 yrs with a greencard (acquired 2001), but then left in 2002. I filed my last return in 2002 (jointly with my spouse) and my green card expired in 2011. I have just recently stumbled across your blog and found out I still had filing responsibilities. My entire family (spouse and children) are also in the same situation (expired green cards) as well as dual citizens, however they have never filed anything in the past as we left when they were very young. We are all considering becoming compliant and then following their renouncement procedures to be done with all this, what would you suggest.
Am I obliged to file and should I comply through their streamlined process (just file for the last 5 years) and then immediately exit and renounce? My sole income is just wages and super.
Also I still have some IRA with US address which I would like to access in a few years, what should I do with it when time to withdraw without much tax filing hassles?
I am considering filing my own tax returns under this streamlined process. But due to the tax treaty, it isn’t clear whether I would file using 1040 or 1040NR. From the IRS, I am a resident alien due to the greencard test. However, following the tax treaty, I think I am a non-resident alien. Which tax form would I be filing under, and would the Foreign Earned Income Exclusion or Foreign Tax Credit be applicable? I’m also not sure whether I would have to report my superannuation, and under which forms this would fall.
Thanks in advance and very much appreciate for your help.
Regards,
Thomas
Hello Karen,
I honestly don’t know who to ask any of this. A tax professional would just tell me to become compliant ASAP.
I am a dual US-Spanish citizen born in Spain (luckily). I lived in the US as a child but I’ve been living in Spain for a while now(highschool, university…). I’ve only been working for a couple of years and I’m pretty sure I don’t reach the minimum filing threshold even with the small profits I’ve had by selling bitcoin. I did, however, need to file my FBARs but had no idea (how would I?), with the info from my bank account and also my cryptocurrency wallet I suppose. Should I….
1. Forget about it. I was born in Spain. I have no financial ties with the US. My parents, who also became citizens, have a pension from the US and are not compliant either, though. They have no idea about any if this. Would the IRS even know I/we exist?
2. Become compliant by filing my past FBARs. File for 2020, receive the stimulus payments and use them to renounce my citizenship. I’m not completely sure that this is how it works. Would I still have to file 5 years of taxes to not be a “covered expatriate” even though I had no obligation to do so?
Thank you so much.
1. They will never find you or do anything to you in Spain.
I don’t even know where to start. I have spend hours and sleepless nights reading all the posts from the Isaac Brock Society to figure out FATCA. Yes, I am in a panic.
I was born 62 years ago in the USA to a Canadian father and an American mother (she lived in the US for 18 years and then came to Canada to live where she met my father).
My parents were in the USA at the time when I was born, stayed for three months, and then returned to Canada where my parents had a home. I was registered with the Canadian government as a “Canadian Citizen Born Abroad.” I have lived in Canada all my life except for those three months.
I have never had a Social Security Number, I have never had a US passport, and I have never worked in the US. I do not own property anywhere in the world. I didn’t receive a FATCA letter from my bank; I just found out through my Financial Advisor who told me I cannot open a new portfolio because I am not FATCA compliant. My RRSP and TFSA are with her company and were not an issue to open years ago. I had never heard of FATCA and was horrified to find out I am considered an American citizen. I am newly retired and truthfully, sick about this. I do not know what to do first. I have no interest in retaining any ties to the USA. It means nothing to me. Do I renounce first? Do I somehow get a SSN so I can file taxes and then get rid of the SSN? This is all so absurd and ridiculous, like something out of a bad dream, but it is my reality now. Anyone have any advice or suggestions? I would welcome it!
Stay calm and ignore the IRS. They are underfunded and incompetant.
Hello Karen
My son (who has just turned 18), born in Australia, but has dual citizenship with the US. He obtained the dual citizenship before the new law about US citizens living abroads requiring to pay tax. He is a student and finishing school this year. I am in two minds of having him relinquish his US citizenship just because of the tax law and having to do this every year, hence paying tax twice when he begins work. Is there is an easier & cheaper process for him to relinquish his US citizenship, as he was a child when I organised this, thinking it could be of benefit, but is just an extra worry for him, which I didn’t want.
Thanks
Hi Jeana,
Unfortunately, there’s no cheaper process for relinquishment. All must pay the $2350 fee to the consulate to get a certificate of loss of nationality.
Hello Karen.
I am a U.S. citizen working abroad. I filed a U.S. tax return during my first year abroad but have not filed for the past 4 years although I am still working overseas in the same place. I was also not aware about the FBAR. I am panicking and don’t know how to proceed from here. I would greatly appreciate it if you had any advice on a recommended course of action.
No need to panic. You have time to consider your options. Your best bet is to read widely so that you can make your own decisions. When asking for advice, be sure to consider what incentives are in place that might impact the advice given.
Karen,
I am about to travel back to the US from Australia (in 2 weeks). I am a dual citizen with two valid passports. A year ago I contact an Expat agent to start the process of the 3yr compliance and forwarded some information, but did not complete the information to actually file a return. I just felt so overwhelmed and like I needed to think it through. I never paid anything and a return has not been filed. I have lived in Australia 26 years and have travelled back and forth many times. I’m worried, though, that I may get stopped from entering this time because I contact the Expat agent. Trying not to OMG! Any advice?
No need to worry. Nothing goes to the IRS until you actually file the return.