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I left the US in 2001 and have lived in Ireland since that

time. The last tax...
I left the US in 2001 and have lived in Ireland since that time. The last tax return I filed was as a self employed person in 1999 and I had a $3000 unpaid tax liability for that year when I left. I did not work in Ireland between 2001 and 2006 so I didn't file a tax return here or in the US. I am tax compliant in Ireland since 2007 when i began working. I know that I need to file US return for 2000, I still have all my receipts, but how do I get started? Should I contact the IRS myself or hire a tax attorney/accountant to represent me? And do I need to file any returns for 2001 to 2006?
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Answered in 9 minutes by:
11/2/2009
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Verified
Hello missy,

In a case where a taxpayer has not filed a return in a number of years, the IRS requires that you start compliance by filing for the previous 6 tax years. In the majority of cases, they will not make you go back any further than 6 years. That being the case, at this point in time I would recommend to start your filings with the 2007 tax year rather than going back to the year 2000. This is assuming that as you stated, you had no income in the years 2001 through 2006. If you had no income during those years, then you are not required to file a return.

You will not need an attorney or anyone else to represent you at this point. Right now it will just be a matter of getting your paper work submitted to see where you stand. Since you have lived in Ireland for the past 8 years, you will qualify for the foreign earned income exlusion. That amount varies each year, but for the 2009 tax year the exclusion amount is $91,400. What that means is that you are allowed to exclude up to $91,400 from any earned income you have in Ireland before any additional earned income becomes subject to tax here in the US.

Even if you owe no tax because of being able to claim this exclusion, you are still required to file a return. But no taxes will be due if your earned income is below this amount, and therefore you would also owe no penalties for the late filing. Hence there would be no reason for you to obtain representation.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you missy and let me know if you have more questions.



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Customer reply replied 8 years ago
Thanks for that answer Merlo. It is a relief to know that I wont be in trouble for the time I have been in Ireland. But for the first part of the question, what should I do regarding the previous tax I owe and the 2000 unfiled return. Will I have huge penalties/interest? Do I need a tax attorney for that part?
Hello again missjilly,

At this point in time, I would not file a return for the year 2000, unless you are requested to do so by the IRS. Since that return is now from 9 years ago, it is not likely that they will request that you go back that far to file a return for that year. Once you file your returns for 2007 and 2008, if you then hear from the IRS and they ask you to file for the 2000 tax year, you can always do so at that time, but I would not file that year unless you are specifically requested to do so.

Regarding the taxes that you owe from 1999 -- the IRS has a statute of limitations of 10 years to collect any past due taxes. Your 1999 tax return would have been due on 4/15/2000 which means that the statute of limitations on the collection of those taxes should be expiring next year in April, 2010. After that time they cannot legally pursue you for collection of these taxes any longer.

You can, of course, pay the tax debt that you owe from 1999, however, keep in mind that interest and penalties have continued to accrue on the amount you owed since that time, so the amount of $3,000 could now easily be double due to the penalties and interest which have been accruing.

If the tax debt is simply allowed to reach the expiration date on the time they have to collect this debt, then the IRS will not attempt to collect these taxes from you after that point in time.

If this was helpful please press the Accept button.

Thank you missjilly
Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9,783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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