Are you subject to U.S. Tax?

Are you subject to U.S. Tax?


As an Australian tax resident, you probably feel that how the US imposes tax on its citizens does not concern you. The reach of the US tax department might be further than you think.

The United States is one of only three countries in the world to tax individuals with little regard as to where they reside. If one of your parents was a US citizen, or if you held a green card for more than 3 years without physically returning the paper upon leaving the country, you might be subject to US tax. If you are a US citizen, the US will definitely want to tax you. Whether you currently, or ever, lived in the US is actually irrelevant.

If you are caught under US tax laws, this could mean you have additional tax lodgement responsibilities and also (potentially) additional tax to pay.

While not a recent concept, this issue is topical with the upcoming implementation in Australia of the Foreign Account Tax Compliance Act (FATCA).

Under FATCA, most Australian financial institutions (i.e. your personal bank) are required to report to the US tax department (i.e. the IRS) comprehensive information for all of their US citizens. If you are a US citizen, you might have started to receive notices from banks requiring you to disclose your US citizenship to them.

The IRS will use this additional data to track down those that are not lodging income tax returns. With a standard penalty of at least US$1,000 per document lodged late, and annual compliance requiring the lodgment of several documents, the risk of non-lodgment goes beyond the tax shortfall. The IRS regularly organises amnesty programs, so coming clean with them before they start taking action is often the best policy.

While we cannot provide you with US tax advice, we have experience with resolving such situations, and can liaise with US tax advisers to ensure both your compliance and longer-term strategies are secured.

So, before you plan your next trip to the US, maybe give us a call and check on your situation. Nothing ruins a trip like being detained at customs for tax evasion!

*Correct as of April 2015

*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.

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