If you (a) are a U.S. taxpayer in Ireland who (b) exceeds the income threshold for any year, then you must file a U.S. tax return with the IRS reporting your worldwide income (including income taxed in Ireland).
Some common misconceptions that we have encountered are:
- I have lived in Ireland for many years, so I do not have to file a tax return with the IRS:
The obligation to file a tax return applies no matter where you live, even if you have always filed your tax returns in Ireland.
2: I am dual citizen, so I do not have to file a tax return with the IRS:
Holding dual citizenship does not remove your obligation to file a tax return with the IRS.
3: My green card expired years ago, so I do not have to file a tax return with the IRS:
Until your green card is properly revoked you are a U.S. taxable person. This is often difficult to comprehend – but your status under the tax code does not have to match your status under immigration law (‘illegal’ immigrants in the U.S. are required to file tax returns [Substantial Presence Test] even though they are not allowed work in the U.S. In fact, it is estimated they paid more than $12 billion in U.S. taxes as far back as 2015). An expired green card is not considered properly revoked – even if you have been living in Ireland for many years.
4: There is a tax treaty between Ireland and the U.S so I do not have to file a tax return with the IRS:
There is a tax treaty, but it does not remove your obligation to file an IRS tax return, although the tax treaty can reduce or eliminate the tax you owe, you must still file the tax return. The tax treaty has a ‘Savings Clause’ which disapplies many of the benefits of the treaty for U.S. citizens and tax resident aliens (green card holders) meaning that they are required to file U.S. tax returns if they meet the ‘threshold test’.
5: If I live overseas my income is exempt from U.S. tax so I do not have to file a tax return with the IRS
You can claim an exemption from the IRS for some foreign earned income (up $112,000 for 2022, rising to $120,000 in 2023), but you can only claim this exemption when you file your U.S. tax return with the IRS. Even if the exemption takes you under the income threshold, you must file the tax return to claim the exemption. Likewise, any foreign tax credits allowed must be claimed to reduce your U.S. tax liability.
6: As I pay tax in Ireland / UK, I do not really owe the IRS any tax, so I do not really need to file a U.S. tax return:
You can reduce or eliminate your U.S. tax liability if you claim exemptions and tax credits on timely filed U.S. tax returns – but you still need to file the returns to eliminate the tax. However, many IRS penalties result from not declaring non-U.S. bank and financial accounts (‘FBARs’) to the IRS. If you have not declared your Irish bank accounts to the IRS when you should have, you can be fined $10,000 per year per account (these fines can be reduced to zero if you qualify for and file for the Amnesty before the IRS contacts you).
7: Even if I do not file, the IRS is unlikely to catch me:
Foreign non-compliance is a heightened target area for the IRS as failing to file a tax return can be a misdemeanor or a felony. Willful failure to file a tax return is a misdemeanor, and in cases where an overt act of evasion occurred, willful failure to file may become a felony. Since 1 July 2014 for each year the Irish and U.K. governments have given the IRS details of all bank and financials accounts held by U.S. persons in Ireland / U.K. In 2022 the IRS began hiring 87,000 additional agents to help track non-compliant taxpayers.
There are amnesty and voluntary disclosure programs that can bring you into compliance with IRS filing obligations, but they (a) are discretionary concessions given by the IRS that can be withdrawn (some have already, and (b) mainly require you to submit before the IRS writes to you. The best programs entail showing that your conduct was non-willful – which is a legal concept borne out in U.S. case-law.