Who gets caught up in international tax
The United States generally taxes its citizens and green card holders on worldwide income, wherever they live. Nonresidents are generally taxed on income from U.S. sources, often through withholding. A foreign tax credit and the rules of an income tax treaty, such as the one between the United States and Korea, can reduce double taxation, but they usually do not remove U.S. filing requirements. Treaties also tend to preserve the U.S. right to tax its own citizens. Individuals moving into or out of the United States face questions about when residency starts and ends for tax purposes, which do not always match immigration status.
Reporting that is separate from tax
Many international tax problems are about reporting rather than tax owed. U.S. persons with foreign financial accounts above a threshold generally must file a report with the Treasury Department's Financial Crimes Enforcement Network, separate from the tax return. Other forms cover foreign assets, ownership of foreign companies, foreign trusts, and certain gifts or inheritances from abroad. Penalties for missed information returns can be significant even when no tax is due. Foreign investment funds can also be taxed under unfavorable rules that surprise people who bought them abroad.
Catching up on past years
The IRS offers procedures for taxpayers whose failure to file or report was not willful, and a different path for those whose conduct may have been willful. Choosing between them is a legal judgment with consequences, and the answer depends on facts we would want to understand in detail. Gather foreign and U.S. returns, statements for foreign accounts, documents about foreign companies or properties, and records of any inheritances. In a first meeting we identify what may be missing, discuss which correction route fits, and look at what the foreign country's tax authority may also expect.
