If you are a USA citizen living in UK do you file US tax returns?

[TaxesOhNo]

To my horror, I have known that I am supposed to but it’s now been 24 years of living in the UK (England) and I have never filed a USA tax return. Annoys me that the USA is the only first world country that requires it’s citizens abroad to file tax returns whether or not they owe US taxes.

I just checked and the cost will be approx $1200 for filing for the last 5 years.

Am I going to tax hell if I don’t file? Anyone else done similar and filed after all those years?

I'm not American but from what I know of US taxes, you'd be in a lot of trouble if you went back there to live...

Well I still have a home there and travel there but not very often. Going to have to sort out this tax situation. I don’t plan on returning to the USA to live but plans can change.

Bwah so annoying.

Nope.

I have no intention of going back to live , and have no assets there, so I don't think small fry like me are going to be on their radar.

If it does come up, I'll sort it.

Yes - or I did until I renounced my citizenship which you can only do if you are tax compliant.
The IRS has fingers everywhere, they can tax you on house selling, banks now ask if you have other nationalities and won't let you get certain things if you have dual nationality with the UK. The banks have to declare it under FATCA. I was unable to get a stocks and shares LISA due to US tax reasons. I also had to pay tax to the US on a small inheritance from my English grandfather.

Fatca
www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca

Its expensive but important.

Official rules
www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad

Lots of services help do it and can make you tax compliant. You don't get penalised for the first time you do it, no matter how many years you've missed.
Lots of useful private groups on facebook.
Basically the IRS can hunt you down and find you even in the UK.

Yes, every year. I use hr block expat service. Means I also received stimulus cheques.

I did until I renounced my citizenship. Or rather, I did the formal catch up and then did annual returns for a couple of years until I thought ‘sod this’ and organised myself. Easier as I was UK born and bred and had no intention of ever living in the US. I can send you the details of the accountants I used if that’s helpful? It wasn’t cheap, I’m afraid.

Thank you all for the so helpful info. I have considered renouncing USA citizenship but I do have the assets there and will have USA inheritance. Also, DH and I applied for dual USA/British citizenship for our DCs rather than British/European that DH has. I’m not sure we made the best decision as DCs may want to revoke their USA citizenship.

Will PM you DelurkingAJ - have made contact with a CPA/Estate Planner in the USA to help protect my interests there but would be good to just get the tax returns done and do them until I am clear of all USA financial interests.

You don't get penalised for the first time you do it, no matter how many years you've missed.

Whew - thanks for this. I was imagining myself on “Banged Up Abroad - US Tax Avoiders Edition”

I agree re the “small fries” - why cause such problems for all US citizens overseas - should be the High Net Worth ones being pursued.

@Torak can I ask what benefit you have in retaining your USA citizenship? Just want to think long and hard before considering revoking.

If it makes you feel better your kids would have been US citizens if they qualify for it regardless of whether you had registered them or not.

@SherryPalmer

If it makes you feel better your kids would have been US citizens if they qualify for it regardless of whether you had registered them or not.

Oh yes, that’s right - I do remember reading that - I read last night about Dutch citizens with US ancestry who were angry about the tax situation.

DCs would have qualified as I only have USA citizenship- I need to apply for my British citizenship as I currently have indefinite leave to remain.

I thought that if we had applied for the European citizenship along with British then the DCs wouldn’t have a 3rd citizen of the USA.

I would rather give up my citizenship if I'm honest, which will require me to be tax compliant, yes.

The only issue I foresee with that is if I ever do travel back to the States and they query my birthplace as listed on my UK passport. In the past I just exit and enter using the passport for each country, but I wonder what it would be like if I entered the US on a UK passport.

I see, Thank you, Torak

I get questioned both ways - in the USA “why have you been out of country so long?” And British customs ask why I don’t have a British passport. First task is to get British citizenship.

banks now ask if you have other nationalities and won't let you get certain things if you have dual nationality with the UK. The banks have to declare it under FATCA.

Thank you @negomi90 this is particularly concerning for me. And am reading the links.

@Torak My mum was born in the US. Got a UK passport when I was little (she moved here for uni and never left). She's never had an issue with entering the USA on a UK passport. Once you renounce you are treated like they treat any other citizen of the country who's passport you hold. We both have to have ESTAs to enter. Its never been a problem to get them online. Its not an issue.

@TaxesOhNo the path to renounciation for both me and mum ironically started with the words "Your ex husband (my dad) just had to talk me out of renouncing my citizenship because the americans won't let me invest my English grandfather's money to save up for a deposit on an English house!"
My dad talked me out of that tantrum, but when I told my mum about it, she did digging and it eventually led to us both renouncing (in a calm controlled manner, not as a result of the tantrum).
It helps that we were both tax compliant at the time. My mum spent years not filing taxes, but found out how important it was just before I started working.

Its a catch 22. If you stay US citizen they can interfear with most things. You sell a house in the UK - they will tax it. You earn any interest on any money (£20 in a student bank account) - they will tax it. You're English husband has a business - they can tax it. They won't tax under a certain salary, but that only applies to the salary, not anything else, such as interest on things, savings etc.
But its really expensive to become compliant. You can't do it by yourself unless you're a specialist, its too dangerous. I was paying £600 a year (a few years ago) to do my tax returns and mine were straight forward, with a salary and nothing else. You need someone who does expat taxes as they are more complicated than US local taxes. You're local tax person from where you're American investments are, won't be the right person for this.
In order to renounce, it costs a few thousand extra which you have to pay the US government.
In my view its expensive both time and money but worth it to become compliant and get out and know that the IRS can't decide to randomly hunt me and I don't have to pay them money more.
But you are looking at more than £5000 if you include renounciation fees and tax compliance fees (you need to be compliant for a few years before renouncing).

Obviously, while you can be tax compliant now. You can't start renouncing until you are a citizen of another country. You don't want to be stateless.

I have done some reading and given this some thought. I wasn’t aware of FATCA - there are reasons for my ignorance due to our particular financial arrangements.

FATCA’s reach is outrageous, I am genuinely surprised and shocked.

Someone else may know more about this than me but a brief research showed that the US state department estimated that approximately 9 million USA citizens live outside the USA. I just cannot believe that all of them are tax compliant! And researching citizenship renunciations, the number isn’t as high as I’d expect given the reach of FATCA. “Between 2000 and 2010 the total remained relatively steady at less than 1,000 people, but after FATCA came in, the numbers rose sharply to more than 5,000 in 2016.”

When you say you had to pay USA tax on your English grandfather’s inheritance- presumably in either the UK or the USA and were refunded from one country? The double taxation treaty relief? This is what I was advised on capital gains tax - taxes in both countries refund in one.

with current geo-politics, we are inclined to keep our USA citizenships should we unexpectedly wish to move to the arse-end-of-nowhere USA. Unlikely but we might as well hedge our bets.

Why would the IRS hunt USA citizens down, unless they were HNW, have you known this to happen?

@negomi90

Obviously, while you can be tax compliant now. You can't start renouncing until you are a citizen of another country. You don't want to be stateless.

@negomi90 Yes, no matter what I decide I need to get my British citizenship sorted.

Also thanks for the heads up, re the ex-pat tax specialist, having looked more into this, I agree that a specific specialist will be required. our finances are complicated and inheritance will make it even more complicated. It’s a luxury to have to worry about but should get the taxes done correctly rather than take any risks.

DP is doing this atm , and ended up having about 5 different conversations with tax advisors to find one he felt actually understood both regimes well enough to be able to do it. His affairs are complicated too tbh - lots of shares/investments/shares yet to vest held in the US but he then moves the money here...etc. So that doesn't help!

Dd hasn't so far, she isn't earning (student) will have to from next year. Her work is keen for her not to renounce

@TaxesOhNo My dad is English, his whole family is English. My mum was born in the US and met my dad on a uni exchange to the UK. She moved here to get married. I was born and raised here, all my education was here, my mum got UK citizenship when I was little. I was dual from birth.
Double taxation rules do not apply to investments and aren't absolute. Sell your UK house and buy a new one, you pay all the English fees and taxes, plus US tax on the profits. My inheritance from my Dad's dad (so he had no ties to the US) was not large enough to come under UK inheritance tax rules, but because it was money which didn't come under the USs income rules it got taxed by them. Had it be been big enough for inheritance tax, I would have had to pay UK and US taxes. Likewise interest earned by my LISA while well under the UKs tax free allowance, was taxed by the US. Interest on my normal bank accounts were taxed. FATCA meant the banks wouldn't let me get stocks and shares.
I'm not wealthy, I'm in a shit tonne of student loans, and was saving for a house deposit at the time. The interest I'm talking about was in the £10 and less range, but the US needed to know about it and tax it. This isn't the mega rich we're talking about being shafted, this is normal people ranges.

@DelurkingAJ — if you see this, please could you share the details of who you used to sort this? I really need to deal with it — got a fright this morning when my bank asked for an update to my personal info and specifically wanted my US taxpayer number 😭

@stupidannoyingtaxthing I have sent you a PM.

Looking at this thread I am beyond glad that I renounced and PP is right, it may be designed to stop tax evasion but it catches very ordinary ‘accidental Americans’ who’ve never lived or worked there.

I just filed for the first time since moving here - back in 1999. Different for me, potentially, because I was a low earner all that time so bow the threshold for filing anyway. I only recently needed to file, so I backdated it for 2 years and qualified for the covid tax relief, so I actually made money when I filed. It wasn't neay as scary or difficult as I thought, and the money I received has gone towards my wedding. Win win.

Hi all, I used a small boutique company in Surrey for my us uk tax situation for this purpose- very knowledgeable and helpful in my situation.

Oh, and I plan to renounce citizenship as soon as I have 5 years of tax compliance under my belt. At least I think that's how it works? I'll speak to my tax advisor next year to be sure. I have no intention of ever going back to the states and have no financial ties there, so I don't see why I need to keep my citizenship. (I'm dual)