Picture this: you’ve decided to live outside of the United States for some reason, started moving all of your assets and belongings, and resolved not to return, at least not anytime soon. You’d probably say to yourself, “Finally, no more filing of income tax returns in the US!” Well, sorry to disappoint you, but you would still have to.
According to United States law, all citizens, whether still living in the US or not, must file an income tax return on their worldwide income. You’ll probably find yourself bombarding the Internal Revenue Service with questions like: “Why file an income tax return?”, “What problems will I be having with the government?”, and “What’s in it for me if I file or don’t file?” Before it’s too late, here are the possible scenarios and the reasons why you just have to do it.
First, let’s say you decided to marry a foreigner, and he/she wants to travel to the US to see your family. For him/her to obtain a US visa, you must produce copies of your tax returns for the past three years. What if you missed paying the last?
Or maybe you became a successful businessman outside of the country and you’d like to invest in the US stock market, or maybe even buy a house. How would you explain to the IRS where the money came from? Surely you would want them to think it came from legal means.
What if you have a son while living abroad and he wants to pursue his college degree in the US? How would you prove your income to the university if you don’t have your returns?
Finally, if you are working in a foreign country, you are entitled to a Foreign Earned Income Exclusion where you can deduct up to $82,400 of your earned income from your tax return for each year that you qualify. Before you can be excluded though, you first have to file a return. You may get disqualified just because you have not filed a tax return, plus that income becomes taxable and carries with it penalties that could equal 100% of the original tax.
So why go through all these trouble when you can readily avoid them by filing an income tax return for your worldwide income? It may be quite confusing and a burden at first, but think of all the convenience it could give you!
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