Filing Back Taxes for Working Abroad
This recently came up in the message boards where one reader asked about filing back taxes from overseas. The reader wrote, "I have lived overseas for the past 8.5 years. I just found out that I should have filed taxes for those years....I had assumed that I didn't need to since I made far less than the 80,000+ they say you have to make before you owe any taxes. I see now that many Americans living overseas are under that presumption also."
The solution is to simply file the missing returns. In many cases, there will be little if any taxes owed in the US. That's because the US tax laws provide several ways to help workers overseas from being double taxed (by the country in which they live and again by the US). Wages earned abroad can be exempt from income taxes using the foreign earned income exclusion (up to $85,700 for 2007). Additionally, there's a foreign tax credit that can partially or fully offset US taxes for foreign interest, dividends, and other types of income. Using these two tax benefits can help a US citizen working abroad to keep their taxes very low, often with no taxes owed to the US.
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An offer in compromise is not the right solution to a tax problem for everyone. Really it’s not right for most taxpayers in trouble with the IRS. There are other options available that may be better, and can still save you pennies on the dollar. Attorney Darrin Mish promotes an analysis of a taxpayer’s situation that will support the BEST possible solution to a taxpayer’s problem. Every taxpayer’s situation is unique, don’t be fooled, each situation has enough variances to make an analysis well worth the time and money.