Forget OVDI, File Your US Tax Return First

For any one who has not filed US tax return in the past OVDI is not for you. OVDI is an admission of crime, under tax law. US citizens must file their tax return first and bring up to date their delinquent tax reports.

Here is why US citizens must file US Tax Returns….

**It’s the law – If you are a U.S. citizen or resident alien, you must report income from all sources within and outside of the U.S (worldwide income). It’s that simple. Whether or not you end up paying tax on that income is irrelevant – the income itself must be reported. Not reporting is a crime.

**If you fail to file, you cannot claim foreign income exclusion and you may be liable for penalties. Foreign income exclusion makes it possible to owe no taxes to IRS.

**There is a three year statute of limitations on filed tax returns. If you do not file, the statute of limitations never runs out. Therefore it is in your interest to file to ‘run the clock’ and not leave yourself exposed to IRS audit down the road.

**Most of our clients never actually have to pay anything to the IRS – the combination of taxes paid in Canada and various deductions available to US Citizens, results in no cash outlays.

**If you are a green-card holder and want to get US Citizenship, filing U.S. tax return establishes “good moral character” in the eyes of INS USCIS for immigration compliance.

**If you do owe money to the IRS and do not report it, you are liable to pay penalties and interest, which accrue in perpetuity. After about five years, the amount of penalties accrued may more than double the original tax bill.

**U.S. government is actively exploring the option of refusing renewal of US passports for delinquent taxpayers. Congress requested a study by the Government Accountability Office (GAO) to look into whether withholding US passports from individuals with outstanding tax balances would increase IRS tax collections. The study (http://www.gao.gov/htext/d11272.html), released by the GAO in March 2011, suggests billions in unpaid tax revenue could be claimed by the IRS if individuals owing taxes were denied US passports.

‘As federal deficits continue to mount, the federal government has a vital interest in efficiently and effectively collecting the billions of dollars of taxes owed under current law. Federal law already allows the linkage of debt collection with the passport issuance process in certain areas, including for certain outstanding State Department debt and child support enforcement, the report said.