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In a recent statement, Internal Revenue Service Commissioner Danny Werfel indicated "The growth of bad tax advice on social media continues to grow, luring unsuspecting taxpayers." He urges individuals to "do some research before falling for these scams. Finding a trusted tax professional or visiting IRS.gov is a better way to research a tax issue than relying on someone talking in their car or their kitchen about a non-existent tax hack." There are tax laws in place, and like it or not, most U.S. citizens living abroad have a reporting obligation regardless of what self-proclaimed social media influencer has said. As an American, there are very compelling reasons for remaining tax compliant, and if you have not filed tax returns in years, you might consider getting caught up on your taxes a 2025 New Year's resolution.听听

7 reasons why tax compliance is your best option

Filing a U.S. tax return is a fundamental responsibility and an annual filing requirement regardless of where you live, your tax payments to a foreign government, or a country's tax treaties with the U.S. Many of our clients have fallen prey to well-meaning, albeit misguided advice only to have significant life events happen when filing a tax return was suddenly unavoidable. Events like marriage, a job transfer, a death in the family, divorce, or a home sale often materially change a tax scenario, and a lack of understanding and proper planning could produce unexpected results.听

While taking a stranger's advice and avoiding Uncle Sam's detection may have worked in past years, their effectiveness is not likely to continue. The IRS has dramatically increased its attention toward offshore activities, and its ability to identify Americans living abroad has an all-encompassing global reach. The mechanisms for enforcement are improving, and hoping they don't find you is an ineffective strategy over the long term. That said, there are compelling reasons why voluntarily remaining or getting tax-compliant is your best option.听听

1. Loss of the Foreign Earned Income Exclusion (FEIE):听听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听听

The Foreign Earned Income Exclusion (FEIE) is one of the most common tax benefits U.S. expats can access. If you're eligible, it allows you to exclude all or a portion of your foreign-earned income from their United States taxes ($126,500 for tax year 2024). Many expat taxpayers think that since their income is under the threshold, they are not required to file a tax return, which is inaccurate. The FEIE is a voluntary election; you choose it by filing an annual tax return and filing Form 2555 鈥� Foreign Earned Income and failure to make this choice timely could cause you to lose this benefit.

2. Back taxes can cost you your U.S passport

Technically, the IRS does not have the right to take your passport, but it can have the State Department restrict or revoke it if they assess that you have an outstanding tax debt of $62,000 (currently). If you think there is no way you could owe that much, think again; this includes penalties and interest, which can add up quickly. The IRS sends at-risk taxpayers a letter as a first step, but as many expats know, international mail can be slow. At the same time, by law, the IRS will certify taxpayers with seriously delinquent tax debts to the State Department.听

Generally, the State Department is prohibited from issuing or renewing a passport to a taxpayer after receiving a delinquent debt certification from the IRS. The State Department can also restrict your international travel or revoke a current passport.听For taxpayers with certified tax debts overseas, the State Department may issue a limited-validity passport (i.e., a temporary passport), allowing the taxpayer to return to the United States.听听

3. Avoid penalties on missing/late informational forms

Even if you don't owe any tax, you may have reporting obligations, and failing to file certain informational forms can result in substantial penalties. Forms such as:听

• The
• FATCA Form 8938 - Statement of Specified Foreign Financial Assets听
• Form 3520 - Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts
• Form 5471 - Information Return of U.S. Persons with Respect to Certain Foreign Corporations.

These forms are required to disclose foreign assets, financial accounts, and interests in foreign corporations. The penalty for late filing or failure to file these forms can be $10,000 per form even if you do not owe any U.S. taxes.听听

4. A refund could be coming your way

The IRS provides a window to claim refunds. Americans abroad are still eligible to claim the third and final stimulus check; however, you must file by April 15, 2025, so it is essential to act now.听 In addition, Americans with U.S. citizen children with U.S. Social Security Numbers can qualify for the child tax credit. This credit can reduce your taxes but can often lead to a refund. 听Finally, if U.S. taxes were withheld from your pay, you can file a tax return to collect back any over-withheld tax.听

5. Denial of Federal Financial Student Aid

When applying听for federal financial student aid, income and asset reporting can get complicated if you live abroad. The income question on the Free Application for Federal Student Aid (FASFA) pulls in U.S. tax return data directly from the IRS, and the application directs you to specific line items on the U.S. tax return. If you are a U.S. citizen who only files foreign returns, you must consent for FAFSA to confirm with the IRS that you did not file a U.S. tax return. If you do not consent, you or your child can not request federal student aid.听听

6. Secure a spouse's Green Card

A nonresident spouse filing for permanent residence based on marriage to a U.S. citizen or a permanent resident must prove they have a bona fide marriage. U.S. tax noncompliance can prevent or delay this process. The United States Citizenship and Immigration Services (USCIS) will request U.S. tax returns from the sponsoring spouse, to prove financial support of the spouse seeking a green card. If the sponsoring spouse did not file tax returns, they will need to catch up on delinquent filings or provide an exemption letter stating that their income was below the minimum income threshold for filing a tax return.听听

7. 听Renouncing U.S. Citizenship

After carefully considering the significant tax implications that renouncing U.S. citizenship can bring (e.g., exit tax, post-renunciation taxation, nonresident tax), if you have not filed tax returns, you must be fully tax compliant for the five years preceding renunciation. Failing to file for multiple years can create serious complications when expatriating, which makes the renunciation process expensive and legally complex.

Avoid these 5 costly mistakes

Instead of looking to shady or ill-informed influencers on social media, we believe a better option for taxpayers is to educate themselves, work with a professional, and learn from the mistakes of others. You can avoid tax landmines if you know what they are, where to look, and whom to trust for guidance. Learn from the plight of others and avoid these costly mistakes.听

1. Retirement savings drained

After living and paying taxes in Spain, the IRS issued a notice requesting missing tax filings. The retired couple had not filed in over a decade, mistakenly believing they were not required to file because they were under a threshold. The stringent penalties and interest charges totaled several hundred thousand dollars, causing them to sell their home and lose most of their retirement savings.听

2. Career put on hold / education delays

After living in France for several years, a student pursuing a postgraduate degree was denied U.S. Federal student loans because the IRS flagged her as a non-compliant taxpayer. She could not afford to continue with the postgraduate program and had to put her career aspirations on hold. A Japanese "accidental" American could only apply for financial aid once she was caught up with her taxes, delaying her studies for a year.听

3. Denied U.S. entry

After working in the U.S. for many years, an Indian national became a naturalized U.S. citizen. She moved back to India to care for her aging parents but did not file taxes while she was away. While in India, the IRS issued a demand notice for unpaid taxes, interest, and penalties, which she could not pay. The State Department restricted her international travel, and she could not enter the U.S. to work or to visit her children and grandchildren.

4. 听Delayed Green Card 鈥� Married couple separated

An American born overseas was presented with a promotion opportunity of a lifetime and accepted a C-Suite position in the U.S., not realizing the implications his noncompliance would have on his spouse's green card application. He is now facing the arduous task of gathering his data so he can catch up on his outstanding tax filings, which include foreign asset reporting, the complex reporting requirements resulting from gifts from a nonresident, and his ownership percentage in a foreign corporation. The couple has been living apart for over six months.听

5. 听Wage garnishment and job termination

After moving to Japan, a young taxpayer did not file U.S. tax returns following the inaccurate guidance of a friend who told him because he was paying Japanese taxes, he would not pay U.S. taxes. He understood that meant he didn't have to file. In addition, he was unaware of reporting requirements for his ownership in foreign bank accounts. The IRS identified him as a non-filer and initiated action with his employer to garnish his wages. His employer, a large multinational company, did not want involvement and terminated his employment.听

Done listening to strangers? Let us help

These situations highlight how U.S. citizens living abroad who neglect their tax obligations often find themselves trapped in complex and distressing scenarios. On top of that, we read post after post of people saying that international tax accountants and lawyers are 鈥渇ear-mongering people as a means to grow their tax business.鈥澨� It's simply not true, and the lack of awareness about U.S. tax requirements combined with so much misinformation can lead to some truly heartbreaking situations.

The good news is, now you know! And if you were unaware that you had a filing requirement, the IRS has provided a way to catch up voluntarily and penalty-free. If you are in this predicament, you may qualify for the . You still have options even if you don't qualify for this program. But don't wait too long! Options available now might not be available in the future. Also, if the IRS听contacts you about your tax delinquency first, you may lose the privilege of this amnesty program.

We understand there is much to unpack, and navigating this process alone can be overwhelming. Let us do the heavy lifting and help you. Take the next step:听 and set up a consultation today to talk to a 鈥渟tranger鈥� but one with the expertise to provide you with the guidance you need to get back in compliance with the IRS.