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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 13328
Experience:  15years with H & R Block. Divisional leader, Instructor
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Hello, If an individual lives as an american-citizen ex-pat

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Hello,
If an individual lives as an american-citizen ex-pat in Australia, pays Australian taxes on earnings of <$40USD, but does not pay U.S. taxes, what are the ramifications? How may this be remedied Thanks! Tip for a helpful answer.

Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
An American citizen living in another country has some relief to rely on when it comes to taxes in the US.
The earned income my be excluded from US tax using form 2555 (up to yearly limits). They are required to file but may not have any tax due.
They are also allowed to use the foreign tax credit when the y file their US return. This would allow for a credit on the foreign taxes paid. They could not use the Form 2555 and the Foreign Tax credit (form 1116) on the same income but those are both options.

Robin D. :

The key is to file the US return and take advantage of the available options. Neithe rare automatic an dthe return has to be filed to request the relief.

Robin D. :

The ramifications for not filing are missing out on the exclusion (form 2555). If the IRS comes to you first they can deny the relief.

Customer:

Thank you! Very helpful. This is for someone who was outside of the U.S. since 2008. Filed taxes in 2008 based on 2007's income, but has not filed in the U.S. since. This person is now back in the U.S., for three months, and is filing a marriage-based green card petition on behalf of a foreign-born spouse. Since he/she has to file an affidavit of support, he/she is being asked to submit tax returns. since there aren't any, he/she is worried that USCIS will deny the petition based on his failure to submit taxes. He/She is not the financial sponsor in real terms (his/her father is). Have you encountered this issue before? Do these two bureaucracies talk to one another?

Robin D. :

Yes they do because you would need to supply certified copies of the tax returns. You need to file those past returns. Even if you are outside the US you are responsible for reporting your worldwide income.

Robin D. :

We see this on a regular basis. The tax returns are required if you had income that was earned and was not less than the requirement for each year to file a US return.
You must file a federal income tax return if your income is above a certain level; which varies depending on your filing status, age and the type of income you receive. It is for most years your standard deduction and personal exemptions combined. If you have more than those you are required to file.

Customer:

OK. Thanks for your help!

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