Here at Taxes for Expats, we are frequently asked by expatriates living and working outside of the United States if the IRS would ever be able to discover that their annual US expat tax returns are not filed. The simple answer to this question is: Yes, the IRS will be able to track you down if you are not filing your US expat tax return annualy.
Now we will get into the ways in which the IRS will be able to identify you as a delinquent taxpayer and hold you accountable for your tax liability:
- You apply for Social Security or pension benefits;
- You open a US based financial account;
- You inherit money or assets from parents, grandparents, or others who have passed on;
- You are reported by a whistle-blower; the IRS offers ‘finder fees’ for individuals who report other individuals for not paying their income taxes. The highest known whistle-blower fee so far is $104M;
- You renew your passport and are forced to provide your social security number which is, then, sent to the IRS;
- Your foreign income or financial accounts are reported to the IRS due to an information sharing treaty enacted by FATCA;
- You register on the internet in a public domain such as Facebook or Twitter;
- You register the birth of a child born overseas with the US Embassy in your host country;
- You are involved in a marriage, divorce, or some other matter of public record;
- You enter the United States using a foreign passport which indicates that you were born in the US;
- Your name appears on stolen information on foreign financial accounts which are passed on to the IRS;
- Your adult children submit applications to universities or other learning institutions in the United States and provide information about income and payments;
- You are listed on another’s US expat tax return or foreign business documents which have been shared with the IRS;
- You are indicated on suspicious activity forms submitted to the IRS (this form is often submitted by banks, auto dealers, and other institutions which have reason to suspect tax evasion and other suspicious activities);
- You are included in information which has been provided to SOCO (Serious Organized Crimes Agency) or the United States Treasury Financial Crimes Enforcement Network;
- You are identified via information provided to the IRS or Department of Treasury by an individual taking advantage of an OVDI (Offshore Voluntary Disclosure Initiative);
- Or you are a member involved in forming a corporation or partnership in a foreign country which requires you to identify your ownership as an American Citizen.
The number of countries which share information about US Citizens with the IRS is steadily increasing. Information sharing treaties are helping more countries (not only the United States) to realize more tax revenue than ever before, and the internet is making it more convenient to share information and track down individuals who are not filing regular US expat tax returns with the IRS or reporting foreign financial accounts to the Department of Treasury.
If you have been delinquent with your US expat tax returns to the IRS or have failed to report your foreign bank accounts in excess of $10K to the Department of Treasury and you need help filing back taxes or taking advantage of the 2012 OVDI while it is still in effect, make sure to get in touch with a US expat tax professional who can help you resolve your tax issues with as little repercussions as possible.