Any US citizen, greencard holder or US resident working overseas is required to file a US federal tax return reporting their worldwide income, regardless of whether they are resident and paying tax in the UK or whether any US tax is due. This includes those who have inherited citizenship through a US parent and may not even hold a US passport. Many Americans are entirely unaware of their filing responsibilities. The attitude of the IRS to foreign filers has substantially hardened as a result of concerns regarding terrorism, money laundering and tax avoidance.
Substantial penalties can be imposed by the IRS for a failure to file a return or certain information forms even where no tax is due – with penalties typically starting at $10,000 per form, per year.
Certain investments which are very common in the UK, including certain forms of pensions, stocks and shares ISAs and unit trusts or OEICs can create substantial problems for US filers as a result of differing tax treatment in the US.
In addition to the filing of federal tax returns, American persons may also need to report details of their UK and non-US bank accounts to the Department of the Treasury if the maximum balances in aggregate across all accounts exceed $10,000.
Fortunately there are various disclosure opportunities currently available for US persons who have got out of date with their filing, or who may have never filed a US tax return to get their affairs in order.
websters offers a free half hour confidential consultation to discuss your circumstances and any potential US tax issues. To contact us to set up a discussion please use the enquiry form here.
Areas in which we can advise include:
- Completion of US tax returns
- Completion of the FBAR foreign bank and financial accounts form FinCEN 114
- The streamlined filing compliance procedures for voluntary disclosures
- Application of the UK-USA Double Taxation Treaty