So Confused - not filed since moving to UK

My husband is a US citizen, I'm a UK citizen. He's been here since we married in 2006 and I've never lived in the US. He's indefinite leave to remain, if that makes any difference.

He has not filed a US return since he's been here. He believed he didn't have to file because his income was so low - he's been on minimum wage for years and is now on about £18k per annum. We rent and have no assets, and our bank account has never had more than about £2k in it.

I think we were wrong and he should have been filing all along even though it's unlikely that he would have owed anything. Now his passport is up for renewal and I keep reading scary things about the IRS hunting people down for non-compliance and I'm finding it hard to get a clear answer about what to do next.

Obviously I don't want any trouble and will do whatever needs to be done to fix it. Do we need to hire someone? We have two very young children and live paycheck to paycheck so it would be a huge struggle to raise even the amounts listed for straightforward one year tax filing. On the other hand, a massive penalty fine from the IRS would likely bankrupt us entirely.

Am I correct in thinking he doesn't need to do the FBAR in our situation? Can we/should we do a voluntary disclosure and how on earth do we go about gathering all the information? I've checked the IRS and embassy websites but I'm more confused than ever about whether we qualify and what we need to do it.

In light of similar recent topics, let's start from the top. 

Your husband is a US citizen. He has a right to a US passport, and may use it to travel to the US or elsewhere. When he applies for a new passport he will now have to include his US Social Security Number (SSN), the same number used for tax identification.

The confusion: There are laws proposed, laws currently on the books, and laws in people's imaginations. Is the IRS ruthlessly combing Dept. of State records looking for the SSN’s of USC's living abroad who are delinquent with tax and asset reporting? The IRS or Treasury may request info from the DoS, and there may soon come a time when the transfer of info (SSN) is automatic. Some believe it already exists. Right now, it is difficult for the IRS to interfere with a passport application or have a passport confiscated. They may be able to do it, but it takes a judicial process and a threshold ($50,000??? of tax due???proposed???) before any action can occur. The IRS can confiscate assets without notice, and it does happen, but for someone abroad with no US assets, it's rare unless large amounts are being investigated. Scaremongering is running amuck, but there is a basis for contemplation. Right now, it's unlikely for the average individual abroad. Next week, next month, next year, who knows? And, once you have arrived in the States with passport in hand, the IRS knows where to find you easily.

If your husband's yearly income is above the relevant filing threshold for his status (MFS or MFJ), then he is required to file a US tax return. For 2014 tax year, the MFS (married filing separate) filing threshold was $3,950. So yes, at £18,000/year, if filing MFS a return is required. For years in the past, the thresholds were slightly less.

If your husband wants to become compliant (and he may not want to, it’s his choice to be non-compliant, but there is a substantial risk involved if non-filing continues. YMMV), then the Streamlined foreign offshore procedures would be the recommended programme. The following gives all information on how to proceed. You can complete this procedure yourself without seeking professional assistance if you’re confident of your actions.

http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States

As regards FBARs, the procedure requires FBARs for the past 6 years, but if he was under the threshold (aggregate of $10,000), there is nothing to file. Nonetheless, it may be prudent to include the last 6 years even if the amounts are very small and below the threshold.

Thank you so much for your thorough reply. It is really helpful to know the right system to be looking at. I appreciate you taking the time to explain because I know you must get asked similar questions over and over on this board.

@thewhybird

I have the same situation and have been looking up an expat company to update my taxes. what are you doing for your husbands? I dont think I can be bothered doing my own taxes. I contacted a expat tax agency in the USA and they had quoted me $1,200 to up date my taxes. I can't really afford that! Suggestions would be wonderful. Thanks.

I dont think I can be bothered doing my own taxes. I contacted a expat tax agency in the USA and they had quoted me $1,200 to up date my taxes. I can't really afford that! Suggestions would be wonderful. Thanks.

Filing tax returns is largely about a tolerance for paperwork and research. Unless your situation is extremely complicated,  it's a pain in the patoot, but not impossible to do your own. What did you do when you lived in the US? Turbotax and similar programs can help and there's the old fashioned paper and pencil method. Far easier if you do it when you're supposed to ... but you haven't so now it's catch-up time.

With respect, if you 'can't be bothered' to do it yourself, you're going to have to pay, and it won't be cheap.

Just one point. As a Non resident alien spouse of a US citizen there is no need for you to file US taxes. In fact it's probably better for you if you don't. So your husband should  file married separately. Also why are you posting here? It's mostly his problem.....get him to post.


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