Never filed a return

I've lived in the UK all my life. I have had dual nationality since birth, but have never lived in the USA and never worked there.

I have only ever worked in the UK and have never filed a tax return. I understand that there's a requirement to do so. Interestingly, when I secured my SSN from the US Embassy in London I was told, informally, that if I never used the SSN then there's no reason why the IRS would know of my existence and accordingly I would never have to file a return.

Is that correct?

I would ask someone at the Embassy to tell you 'formally' rather than informally, in writing.

From your comments, may we make some assumptions?

You were born in the UK, or at least outside of the USA. One, or both of your parents was/is an American. You were registered at birth as an American at the US Embassy or you provided evidence of being an American (via parent(s) data) at the time you requested the SS card. Your US Social Security card does not have words to the effect - not valid for employment - written on the front. You did not obtain the card in order to allow someone (including non-US parents) to claim you as a dependent on a US tax form.

If all of the above are true, then (IMHO):
1) you have acknowledged to the US, via obtaining the SS Number and providing evidence, that you consider yourself a US Citizen.
2) the US has acknowledged, via issuing the SS Number without restrictions, that they consider you a US Citizen.

Now, the tricky part.

As a US Citizen, you have the obligations of an American abroad which include filing tax and information returns yearly if you meet the relevant thresholds. You are on record as a citizen. Your situation would be the same if you had not obtained a SS Number, but the chances of 'masking' your citizenship would have improved.

You may be familiar with the term FATCA. It is a US law which requires all banks, building societies, etc., worldwide, to request you to make a declaration of all your nationalities when opening a new account. That information is then passed to the US IRS via HMRC. It comes into effect 1 July of this year, although as I understand it some UK high street banks are already asking the question. You could lie (or have a lapse of memory), but if discovered the consequences could be severe.

If you wish to tackle this above board, then you have a decision to make. Do you ever wish to live in the US? If so, make amends and file as required from here forward. Would you prefer not to have US Citizenship with its attendant obligations? If so, then you need to investigate renouncing your US Citizenship. But, be aware renouncing properly requires 5 years of past US tax returns completed. You also need to investigate FBARs.

I would suggest contacting the US Embassy at this time to request a written statement that, as a US Citizen, you are exempt from reporting will be a fruitless effort and will only heighten awareness of your situation. It's unfortunate you were told this, but it does give you reasonable cause for not filing until now. Could I ask in what year were you told this? I'm guessing it was not recently. 

   



 

I'm wondering how can the US enforce such a law on banks that have no ties to the US? What about in countries where there are ways that local laws and FATCA conflict with each other?

As far as FATCA is concerned there are exceptions for ISA's Premium Bonds, (amongst others) and foreign financial institutions with what's known as a 'local client base'. Also there is a $50k threshold, which may or may not be taken into consideration for new account opening. There are  rules for pre-existing accounts and the identification of U.S Persons .

As the OAP suggests, the information is passed by HMRC to the IRS, so as to circumvent data protection. There are various IGA's, with the U.K having it's own set of amendments. The IRS had a problem, due to data protection and rang up against a brick wall, as U.K banks could not send information to a foreign government directly. There is some interesting reading on the HMRC website that discuses the FATCA in more detail and it's implementation.

I'm wondering how can the US enforce such a law on banks that have no ties to the US?

The short reply;

The simple answer is, they can't unless the other countries (and their banks) agree to co-operate with the US.

The manner by which this co-operation is attained is the threat of economic sanctions. In the case of FATCA, the threat is the 30% withholding on all US sourced funds entering that country. Take, for example, The City in London. Unimaginable amounts of funds pass through the City daily to the tune of hundreds of billions. A 30% withholding on these funds would be crippling, especially if, for instance, Germany agreed to FATCA allowing Frankfurt to handle these transactions with no witholding.

This explains why a number of countries have agreed to a FATCA IGA. There is no gain for a bank to agree to FATCA, but the downside has encouraged the profit-driven banks to lobby their respective governments to sign an IGA. The IGA provides a 'carrot' in the sense that the difficulties of adhering to the FATCA regulations are somewhat relaxed for the banks, and the potential penalties for non-compliance by the banks are reduced.

What about in countries where there are ways that local laws and FATCA conflict with each other?

The short reply;

That is the purpose of the IGA. The privacy and data protection laws of those countries prevent the transfer of customers information. To circumvent those laws, the US Treasury developed the IGAs. The IGA concept is NOT contained in the FATCA legislation passed in the US. The Treasury, on its own, has provided the means for information transfer to occur by allowing (forcing?) each country to pass laws that the information is first given to the relevant tax authority in that country, and then transferred to the IRS. By giving the information to the local tax authority (allowed by all countries) and then transferred under a tax treaty (TIEA ?) already in place with the US which contains provisions for the safeguarding of that information.

There are two problems. Only the US Senate, and not Treasury, can negotiate treaties, and the IGAs in effect override existing treaties. Treasury has stated the IGAs are 'Presidential Actions' which do not require the Senates' agreement. Secondly, no one can guarantee what happens to the information after it reaches the IRS. Senator Carl Levin has proposed it should be shared with the FBI, NSA, TSA, etc..

 

Hi I'm in a similar position to you, I was born in the US but have lived in the UK since I was a teenager. I've never worked in the US. I now understand that I should have been filing tax returns each year! Yikes! I wonder if I could ask you what did you find out in your case? Im finding it so difficult to understand all of this! Thanks

Hi I'm in a similar position to you, I was born in the US but have lived in the UK since I was a teenager. I've never worked in the US. I now understand that I should have been filing tax returns each year! Yikes! I wonder if I could ask you what did you find out in your case? Im finding it so difficult to understand all of this! Thanks

Here's a cheeky comment which you may, or may not, wish to take notice of.

The actual FFI reporting to the IRS (actual data transfer) does not commence until next year. You've flown under the radar so far, you may want to hold fire for another month or two before acting. The reason is yet another possible programme from the IRS acknowledging the unfortunate consequences for long term 'accidental Americans' which have resulted from previous programmes (OVDP, OVDI, and Streamlined).

From a speech given by IRS Commissioner Koskinen to an OECD Tax Conference on 3 June, 2014:

Now, while the 2012 OVDP and its predecessors have operated successfully, we are currently considering making further program modifications to accomplish even more. We are considering whether our voluntary programs have been too focused on those willfully evading their tax obligations and are not accommodating enough to others who don't necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety. For example, we are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that doesn't involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn't involve the threat of substantial penalties.
 
We are close to completing our deliberations on these respects and expect that we will soon put forward modifications to the programs currently in place. Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes. We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA. We expect we will have much more to say on these program enhancements in the very near future. So stay tuned.

http://www.federaltaxcrimes.blogspot.co.uk/2014/06/irs-commissioner-koskinens-prepared.html

It's a tough call, and it's your choice. If you feel safer acting now, then investigate either filing going forward or the Streamlined Programme.

The new IRS streamlined program has now been announced:

http://www.accountingtoday.com/news/irs_watch/irs-eases-offshore-voluntary-disclosure-program-for-non-willful-tax-evasion-71005-1.html

Thank you! Im still confused as in I cant even figure out what form I need! Good timing with the new streamlined program though!

If the IRS want to make an example of someone, I'll give them the name of my step-son's wife. Her mother lived & worked in the US for 20+ years, got citizenship, then came back here, married and had 2 kids. The little witch DIL was quite happy to head to the US Embassy 20 years ago to get a US passport, but when I asked her if she was filing tax returns, she told me "if they want me to file a tax return they can have their passport back".

IMHO, she should be offered free accommodation in some lovely stone mansion in the US that has bars on the windows......

I do feel sorry for the 'accidental Americans' who never knew about filing obligations. Good luck sorting it out.

Thank you! Im still confused as in I cant even figure out what form I need! Good timing with the new streamlined program though!

http://www.irs.gov/pub/irs-pdf/p54.pdf
Tax Guide for U.S. Citizens and Resident Aliens Abroad

http://americansabroad.org/files/1114/0151/5899/Taxes_for_Americans_Abroad_140301_Jauch_and_Jeker.pdf
ACA Dummies Guide -- US Taxes Abroad

First, have a look at either of the two above and determine if your income level requires you to file a return. If so, the standard basic kit for someone with earned income above the thresholds is Form 1040, Schedule B, and Form 2555 (or 2555EZ) or Form 1116.

Additional forms may be required depending on your sources of income, investments, retirement plans, etc. Other forms are for reporting assets and have nothing to do with tax (FBAR and 8938). You may, or may not, be required to file these. If so, these and other reporting type forms are critical since the penalties for not filing them can be severe. If all this becomes too much, you may want to consider contacting one of the professional firms found on this site and elsewhere.

You also may want to consider if you wish to remain a US Person. If you want the ability to move permanently (without applying for immigration visas) to the US at any time in the future with US Citizenship, you'll need to have your US tax in order***. You will be required to complete all required forms every year as long as you remain a US Citizen (in other words, the rest of your life). On the other hand, you may have no desire to ever move to the US. If so, you may want to consider renouncing your US Citizenship. If you select the latter route, you still must file 5 years of back tax returns to avoid being a 'covered expatriate' (not a good classification).

Sorry for being somewhat general in this comment. Each tax return will be different for each individual.

If you decide to enter the new Streamlined programme, you will want the SFOP version.

http://www.irs.gov/uac/Newsroom/IRS-Makes-Changes-to-Offshore-Programs;-Revisions-Ease-Burden-and-Help-More-Taxpayers-Come-into-Compliance

and
http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures

*** possibly! I'll leave it to those who post on the Visa forum to make clear the exact requirement.

Thank you again! That is so helpful.  I do actually want to return to the US, this has really thrown a spanner in the works!