If you were born in America or have a green card, it’s a connection for life. Not least because, around this time of year, the long arm of the tax man may well reach out to give you a little shake.

“It’s a pretty common mistake for people born in the US, who have lived in other countries their whole life not to realise this,” says a tax expert from Blue Umbrella, an accountancy which has a specialist service to help expats meet their US tax requirements.

“But still, if you’re born in the US, you’re required to file your taxes, at least over a certain income threshold. If not, people end up getting angry letters from the internal revenue service or IRS basically saying: ‘Hey, you’ve never paid your taxes, but you’re a US passport holder!’”

Deadlines

So what do you need to know to avoid an unpleasant letter from America? The first is the essential dates: there’s a deadline to pay any tax owed by April 15^th and a deadline to file your tax return by June 15^th.

If this seems impossible, then it is possible to ask for an extension until October 15^th, but you need to do this in time. “You can technically file an extension until December 15th, but you have to have a very good reason and often the IRS denies those,” says the Blue Umbrella expert. “The tax year is a full calendar year and anyone who is a green card holder or citizen from the US is required to pay.”

The good news is that you probably won’t have any extra to pay if you are tax resident in the Netherlands unless you earn the equivalent of more than $120,000 a year – a slight, inflationary rise from 2022.

Interest payments

But the bad news is that if you don’t pay your tax on the April date, you will be charged interest from this point, on a daily basis. And if you are tardy with filing or don’t ask for the extension, then there may be penalties too. “Being an expat, they don’t want to double tax people to a certain extent, though, so unless you make over that amount and are living abroad, there shouldn’t be anything to pay,” he adds.

The tax bands, just as with US residents, are on a rising scale and it’s easy enough to check which bracket you will fall into if you are obliged to pay. Other things to be aware of are savings and property.

“Property is normally taxed where it is, but if you have a business, it can be more complicated because there are extra forms, at least on the US side,” said the tax expert. “The form 5471 is a very complicated business return – although we can help for a set fee of €366 – but it isn’t very common because most people don’t have fancy businesses.”

Fixed price

Blue Umbrella offers a fixed price service costing €365 for a standard American tax filing, for which you will need details of your annual payslip, bank accounts containing the equivalent of over $10,000, any business accounts and property details.

“You just complete the questionnaire and submit any documents we ask for, and if you’re not sure, there are three ways to contact us, by online chat, phone or email, so we can answer questions quite easily,” he said. “Our goal is to make sure that everyone pays the least amount or gets the biggest refund possible!”

But the big priority is to make sure that you know your obligations and fulfill them on time.

“You start paying interest and penalties immediately, so every day that you’re late without having filed an extension, you’ll have penalties and interest on the taxes, going up every single day,” he says. “So it’s definitely not recommended to mess around with that if you can avoid it because you’re just going to end up owing a lot of money when you really would rather not!”

Contact experts in expats Blue Umbrella for help in filing your US taxes