Losing American Citizenship(Paying Taxes)

I was out with some friends in London last night who live in Singapore. They have a few American friends in Signapore. They said that all their friends have to pay American and Signapore taxes. This is to keep their American citizenship! All of them are permanent residents of Signapore.

I thought this sounded like bollocks. Everything I read seemed to say that you can't lose your American citizenship unless you did something like fought a war of terrorism against the US (or something extreme like that).

What is up with that?

Although it isn't "a requirement to keep American citizenship", it is true that American citizens must keep filing American income tax returns and paying tax if necessary.  You won't lose your citizenship over it (indeed, this little rule is why it can be difficult to get rid of American citizenship) but you can get into lots of trouble with the IRS if/when they find out you have been earning money overseas and not reporting it.

You might want to have a look at this site which gives information on having dual citizenship.

You would have to look elsewhere as to the stance of Singapore on dual citizenship, (which I guess your friends don't have if they are only permanent residents as opposed to citizens of Singapore).

I was out with some friends in London last night who live in Singapore. They have a few American friends in Signapore. They said that all their friends have to pay American and Signapore taxes.

This part is true.

This is to keep their American citizenship!

This part is not true.

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As an American you are taxed on your worldwide income, but you get a credit for taxes paid in a foreign country.  (You also can get a deduction called the foreign earned income exclusion but lets ignore this for a moment.)  If you live in a country like the UK, the tax rate is generally higher than in the US.  So your credit for UK taxes paid, cover the US liability.  However, Singapore is a lower tax country, so the Singapore tax will usually never fully cover the US liability.  The result is that your friends pay Singapore tax and then have to pay the amount of US tax left over.

However, this has nothing to do with keeping citizenship.  Not paying taxes is tax evasion but it won't result in you giving up your citizenship.

I think US citizens only have to pay if they make over the equivalent of $87,600.  However, even though you do not have to pay taxes, you do have to fill in the forms.  If you earn a US income off interest, investments, property etc, this I believe is treated like US income as it is not subject to the foreign taxes.   

Okay - this all makes more sense now!

I don't own anything I can be taxed on other than my normal salary - which as a teacher is pretty average anyway.

I've never filled in any forms though. The IRS is going to kick my butt. I've lived here for over ten years!

Okay - this all makes more sense now!

I don't own anything I can be taxed on other than my normal salary - which as a teacher is pretty average anyway.

I've never filled in any forms though. The IRS is going to kick my butt. I've lived here for over ten years!

You really should file your tax returns.  There can be effects of not filing timely, which could include you not being able to take the foreign earned income exclusion.

You really should file your tax returns.  There can be effects of not filing timely, which could include you not being able to take the foreign earned income exclusion.

This is 100% correct.

Your US return must list all income - including UK child benefit, employer contributions to UK pension plans, investments in ISAs, gains on sales of main homes & indeed all UK investment income.

You may also need to file annual forms TD F 90-22.1 under the Bank Secrecy Act.  Penalties for failure to file or late filing of these forms with the US Treasury can be up to 50% of the balance in the account.

To avoid all penalties it is sensible to file annually even though you probbly won't owe a dime!

One possibility is that they were not in fact US citizens but US permanent residents / green card holders.  If a green card holder stops paying taxes, it can be seen as proof of their 'abandoning residence' in the US.  Many folks in Hong Kong and Singapore have green cards but are on extended leave of residence from the US (which also requires a form) and have to continue paying taxes to the US. 

You really should file your tax returns.  There can be effects of not filing timely, which could include you not being able to take the foreign earned income exclusion.

I thought there was no deadline to file if you didn't owe anything.  How late would you have to file in order to not be allowed to take the foreign earned income exclusion?

Yael - sadly logic has nothing to do with the tax code...

A taxpayer can make a section 911 foreign earned income and/or housing cost exclusion election with a timely filed income tax retum (including extensions of time to file), with a valid amended return, or with an original income tax return filed within one year after the due date of the retum determined without regard to any extensions of time to file.

A qualified individual may make a section 911 election in two additional situations. If the taxpayer owes no federal income tax after taking into account the section 911 exclusion, the taxpayer may file a Form 1040 with a Form 2555 attached either before or after the IRS "discovers" that the taxpayer has failed to elect the exclusion. If, however, the taxpayer owes federal íncome tax after taking into account the section 911 exclusion, the taxpayer may file a Form 1040 with Form 2555 attached provided the return is filed before the IRS "discovers" that the taxpayer failed to elect the exclusion. A taxpayer filing an income tax return in either of these situations must type or print "Filed Pursuant to Reg. section 1.911-7(a)(2XÐ(D)" at the top of the first page of Form 1040.

The Form TD F 90-22.1 is one of a series of "informational returns".  This Form is due annually by June 30th and is not extendable.  Since October 2004 the US Treasury has had the power to enforce penalties for non-willful late or incomplete filing (previously penalties could only be assessed for willful late or incomplete filing).  As this is an "informational return", there is always zero payable, unless it is filed late or is incomplete.

If, however, the taxpayer owes federal íncome tax after taking into account the section 911 exclusion, the taxpayer may file a Form 1040 with Form 2555 attached provided the return is filed before the IRS "discovers" that the taxpayer failed to elect the exclusion.

So if you owe some tax after the exclusion and the IRS discovers this first, you cannot claim the exclusion?

Thanks Guya.

I thought there was no deadline to file if you didn't owe anything.  How late would you have to file in order to not be allowed to take the foreign earned income exclusion?

FWIW, it is probably worthwhile to file every year, even if you don't owe, so that you have a record of 'not owing anything.'  Should something happen later, like you move back, or you inherit a gajillion dollars from some rich uncle, or your kids want to go to school in the US and you have to fill out a financial aid form, it's nice to have that paper trail rather than have to explain 'I didn't file because I didn't owe' which always gets folks wondering a bit.