Q&A: I just found out that I should have been filing for years. Please help– where do I begin?
Q: I am a US expat living abroad and I was wrongly informed that I did not need to file a return if I didn’t earn more than a certain amount per year and lived outside the US as there is an exclusion. This was some years ago, I cannot recall the last year I filed a return and I am now very worried as I have recently been informed that I may have been required to fill in a form each year. I don’t know where to begin now.
I don’t know how to find out when my last return was filed and do I need to file a return for all the years I haven’t filed? What forms do I need? Can I file forms retroactively? Should I contact the IRS for help or should I file all years before contacting them?
A: You can look at your situation on the bright side: at least you are getting back into compliance when you are under no pressure! You never know if it might have come back to haunt you at a time when you could least afford it.
Your situation is not as bad as it appears. Regardless of when you last filed, what you need to do is file the most recent three years. This is what we always recommend to our clients. Technically, the IRS requires six years, but the unspoken rule is three. Then, if the IRS requests additional years the taxpayer can provide them.
Your tax return will use the same forms you would have used if you had been in the US with the addition of two forms that are specific to most expatriates: Form 2555 (PDF) – Foreign Earned Income Exclusion (instructions) and Form 1116 (PDF) – Foreign Tax Credit (instructions). The way the tax system works in the US is that a taxpayer must declare all income regardless location.
For information about basic expat tax filing requirements – as well as income exclusions, housing deductions and foreign tax credits available to US expats – please visit our Expat Tax Basics page.