How the Statute of Limitations Affects Expats:

If you fail to file your tax return for any tax year the statute of limitations to collect tax for that year will never run out. The reason they don't run out is because you have to start the statute and you do this by filing your return. This is true whether a return is required or not. 

The Statute of Limitations for Collections, is 10 years. 

If you return to the United States, the IRS may question your failure to file returns and later make assessments based on information they might have about your taxable income.   The interest and penalties on back taxes grow faster than you might think and after a few years may exceed the amount of the original taxes owed.

If you do file your tax return each tax year while living abroad,  the statute of limitations for collections will be "running" and will run out 10 years from the date of assessment. Also, the Statute of Limitations for Audits will, in most situations run out in 3 years from the date you filed your returns.

That means the IRS cannot go back (absent fraud) and try to audit or change those returns later.  Therefore, you should file your return  even if you have no income or don't owe taxes in order to force the statute of limitations to run and eliminate future problems when you decide to return to the U.S.

Ralph Sayers, CPA
P.O. Box 271
Terra Ceia, FL  34250

Call: 941-723-9106
Fax:  941-723-1102
E-mail: ralphs@tampabay.rr.com