[jombe]

Hi Ninjas,
–
I have a situation. I am trying to help someone, who’s a US citizen & resided abroad for last ~15 years. She has never filed income tax returns w/ IRS since she started working (born in US, raised in a foreign country).
–
She recently found out that there could be potential penalties for not filing her returns whether she owe anything to IRS or not.
–
I only have audit experience and not sure where to direct her to other than “Streamlined Filing Compliance Procedures” offered by IRS? Is this the right option for her? I know you guys don’t have much detail to go off of, but I just want to point her to right direction and let her follow through w /the rest. Thanks for any advice you guys can provide!

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[Benny]

Hi, Jombe,

I am an EA and been doing tax for few years. You need get more information from your client. Here are couple of reasons they might not get an penalty:

1. His earning's is too small to pass the filing requirement. Which is the standard deduction plus the exemption. I is only standard deduction for 2018.
2. US person who resides out of US have a annual exclusion around $100,000 from income, the number is different each year. Therefore, they never owned any tax, and the penalty is based on the tax owed.

There might be some other legal ways to avoid the penanlties.

Good luck.

Ben

[jombe]

Thanks for your response, Benny.

I am not exactly sure how much this person makes currently, but I would be extremely surprised if she made over $100k in any of the 15+ years where she earned any income, so that's good news. I read the same on IRS website, but I didn't know if I was missing something as, again, I have no experience in tax, other than filing my own straightforward/meager return each year.
–
She plans on getting everything filed sometime early next year, so I am going to do a bit more research in the meantime to point her to the right direction.
–
Not sure if you will revisit this thread, but in case you do, I was curious about what exchange rate should be used to translate Korean Won to USD. I assume the returns will have to be in USD regardless of the currency you earned your income through, yes? Would it be the average for the year?

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[aaronmo]

The exclusion doesn't apply to FICA…so there can still be tax owed. I THINK there is also some sort of FICA credit with taxes paid into other country's retirement programs, but I'm really not clear on how it works, and I think it may be country specific. I always did SALY when I saw it, and I've only dealt with it once or twice.

The exclusion also has limitations and thresholds…I'd recommend they go to a firm that specializes in expats…many countries have them.

[jombe]

Aaronmo – she already has a firm that quoted her ~$2,000 to get everything taken care of on her behalf. I don't want her to drop $2k for something that might not be that difficult to do. She doesn't really have anything other than savings & salary to report. No investments, no property, etc. I did tell her she might still have to go to that firm if I find the solution to be super complicated as it could mean more penalties & interests, etc, if we don't do it right. Thanks for your two cents though.

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[aaronmo]

$2000 for 15 years of simple returns, but with foreign income, sounds about right to me…I wouldn't do it for less.

Salary in other countries can include that FICA issue I mentioned.

[Benny]

Hi, Jombe.

The exclusion does not apply to self-employed tax, not FICA. But tax paid in foreign country can be credit in their US tax returns.

The currency conversion rate is published on the IRS website. There is a rate for each year. Not the ones we use daily.

Please have your client consult a local tax firm. They need full information to make suggestions. $2000 sounds fair. I am just telling you there are many ways to shelter the taxes.

Sincerely,

[jombe]

Thanks so much, Benny!
She's not self-employed & has paid taxes to foreign country through their returns. Well noted on FICA issue, too.
Where to find the interest rate is super helpful. Again, thanks so much for your help!
Even if my friend ends up going to a tax firm, she'll at least have a glimpse of an idea as to what's going to happen now. 🙂 Thanks!

FAR - 94 (10/4/15), Local Prep Online Lectures, BISK & NINJA MCQ
AUD - 99 (1/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
REG - 96 (4/19/16), Local Prep Online Lectures, BISK & NINJA MCQ
BEC - 91 (7/19/16), Local Prep Online Lectures, BISK & NINJA MCQ

581 days of listening to lectures, reading texts & 10,000+ MCQs...

[Author]

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