What Happens If You Do Not File Your Expat Tax Returns

Are you an expat and have never thought about filing your expat tax returns? Most people may not know what will happen when they fail to file their taxes when working and living abroad. However, the IRS will still notice when you have failed to pay your taxes and you may end up getting hefty fines and penalties. Read on to know what happens when you fail to file your expat taxes.

Loss of Refund

If you fail to file your tax treaty returns, you risk losing tax refunds to the IRS. This means that you will not be penalized by the IRS for failing to file if you have a due refund. However, you cannot get your refund if you fail to file your returns. Generally, you have three years to file your tax return and get a refund. After this, the IRS is not entitled to pay your refund.

Penalties

If you fail to file your non resident tax return by the deadline or the extension, you will be penalized under failure-to-file and will also accrue interest. This penalty of failing to file is usually 5% of the total amount of your unpaid tax. This amount will apply to every new month that your tax return is late, but penalties will not exceed 25% of the unpaid tax amount. This simply means that the longer you wait to file your taxes, the more you will pay in penalties.

Earned Income Tax Credit

If you are entitled to getting the earned income tax credit, then you need to file a tax return for you to claim this credit. For you to get this credit, you need to file your expat tax returns within three years of the due date.

If you do not file your tax returns as a U.S citizen living in Canada, just know that the IRS will find you. With advanced technology, the world is becoming smaller and smaller and as you continue to wait, the interests and penalties are being accrued. It is better to hire a tax treaty accountant to help you stay tax compliant and avoid penalties.