In the past year or so, may US Expats have been coming to me scared that they have not been compliant and thinking that they would be subject to high late filing penalties and interest. Many foreign banks are required by law to report their US clientele to the US treasury which highly exposes their US clients if they have not been compliant. When the client is forced to sign the w-9 form at their bank, it is very often the final straw that causes them to reach out to me asking what they need to do and what type of taxes, penalties, and fines they are going to be faced with.
It is for reasons like these that many US citizens living abroad have been seriously contemplating giving up their US citizenship. The truth, however, is that the overwhelming majority of these Expats have been compliant in their foreign country of residence and had no intention of evading any taxes. The IRS has introduced what is known as the “streamlined offshore voluntary disclosure procedures” for such taxpayers and is an incredible opportunity for most Expats to catch themselves up to date without incurring any penalties or late filing fees whatsoever.
Moreover, many of these Expats soon realize through our conversations, that not only are they not subject to taxes and penalties, but they are actually due refundable credits! Yes, you heard correctly. Many Expats are simply unaware that there are financial benefits by being treated as a regular US citizen for tax purposes even though they live abroad.
One common example is the “Additional Child Tax Credit”. A US taxpayer who has children who are US citizens with valid social security numbers, and are under the age of 17, can usually claim their children as dependents and qualify for a refundable credit of up to $1000/child in refunds. Yes, you heard correctly! Many Expats are eligible to receive up to $1000/child per year in refunds from the IRS! Additionally, one can make a back claim for these refunds as far as 3 years.
Very often a client will leave off after speaking to me not only not afraid of their reporting responsibilities to the US, but are thrilled to have found out that they can actually make money by becoming compliant with the IRS!
