American expats who have not filed USA tax returns for a while always ask the same question. How will the IRS find me? Who will report to the IRS any information about me if I do not live in the USA and do not have any US income?
This is one of the latest emails from one of our clients. “I have lived in China since 2002. I learned several weeks ago that I have to file USA tax returns. Moreover, I received W-9 form from my bank. What is this form about? Who will report to the IRS my bank information?”
Late USA Tax Return – Who will report you to the IRS?
The IRS has stepped up efforts to find American expats who hide assets in offshore accounts and didn’t report their worldwide income. Several FATCA agreements have been signed in 2012. Moreover, there are FATCA negotiations with more than 50 countries. However, the FATCA is not the only way that the IRS will find American expats. Let’s review possible scenarios.
- Offshore Voluntary Disclosure Program. The colleagues and even friends who enter the OVDP can report to the IRS the details about other American expats.
- Birth of a child. The day that American expats register the birth of a child at the US embassy, the information becomes public.
- US passport renewal. US expats are required to provide a SSN.
- Application for social security and pension benefits.
- Whistleblower’s report to the IRS. Some American expatriates living in Switzerland have encountered this situation firsthand.
- US source income. American expats who have US bank accounts and any US-sourced income but who failed to file USA tax returns face higher chances of the IRS inquiry.
- Application for student financial aid. American expatriates who don’t file USA tax returns jeorpordize their kids’ chances to get financial aid.
- Serious Organised Crimes Office (SOCA) and the US Treasury’s Financial Crimes Enforcement Network reports about US expats.
- Stolen bank information. This information was used by whistleblowers to report to the IRS the information about American expats with foreign accounts.
- Foreign banks. Foreign banks that are under investigation by the Department of Justice face harsh penalties for hiding offshore accounts of US persons. These banks try to cut a deal and report the bank account’s details of US customers.
- FATCA and foreign exchange agreements between the USA and foreign countries.
- Facebook, Twitter and other accounts.
US expats who still debate whether to file USA tax returns are encouraged to come forward. The IRS introduced the IRS streamlined program for low-risk taxpayers who can become compliant without facing penalties.
American expatriates should seek help of an expatriate tax professional that provides international tax services. International tax experts at Artio Partners are here to help you.