Mr Green moved to the UK ten years ago, having been born and brought up in the USA. Given he had no income or assets left in the US he assumed that he had no further requirements in the US. After all he was paying all his taxes in the UK.
However, the USA is unusual in that liability to report income is based on citizenship, not residence. Given Mr Green had kept his US citizenship, he should have been continuing to make returns to the IRS even while living in the UK. The US can levy some very severe penalties for failing to report. He should also have been reporting his non-US bank accounts as he held more than $10,000 in accounts outside the US.
In recent years the US government have forced many countries around the world to bring in local legislation to report on income and balances on investments held by US citizens back to the US. This is known as the ‘Foreign Account Tax Compliance Act’ and should allow the US to track down US citizens living outside the US who might have US tax liabilities by giving them information on non-US accounts.
The new rules have been reported in the press and, concerned, Mr Green came to see us. We explained that all the time he has been resident in the UK he should have been filing in the US. We were able to introduce Mr Green to an MSI member who explained the level of information required and the number of years that he needed to go back. We worked with Mr Green to supply all the details of his income and assets required and our MSI contact helped him claim the benefits of an IRS amnesty for US citizens abroad to bring Mr Green up to date.
It was a time consuming process and Mr Green was grateful for our support through the process. At the end of the day there was no actual tax to pay in the US but it was an enormous relief to him to know he is now compliant on both sides of the Atlantic. He can now travel through US customs without worrying about getting a tap on the shoulder…