Filing Tax Return Requirement on N400

[Aharry]

Hello,

I obtained my permanent residency in January 2016 through US Citizen spouse (we now have two children). I started relocating in January 2016 to US but was still back and forth, working and parting with assets in my home country. I eventually completely moved to the US, working for the same US based company in 2018. I have filed taxes for 2018, 2019 and soon, 2020. I did not file taxes for 2016 and 2017 as no income was generated or earned in the US as well as my country has a bilateral tax agreement with the US. All required taxes were paid in my home country.

I plan to apply for naturalization early this year (married to spouse and lived in US for > 3 years) and in completing the N400 form, I obviously answered Yes to - have you ever not filed US taxes since becoming a resident.

Is this a problem or concern, do I need to write a justification on why I didn’t file and if so, is the above a justifiable explanation? Would I need to file for back taxes for those years otherwise. Any support or guidance would be appreciated.

[newacct]

Did you file form 8833 to report income excluded from US tax by treaty?

[Aharry]

No I did not, didn’t even realize that was an option.

[arkaa]

Once you become a US resident (get your Green card) you have to report and file a return for your global income (Not just US income). Since you obtained residency in 2016, you are required to file a tax return from 2016 onwards.

If your offshore income is exempt from US taxation, then you will get a credit for it on the tax you would have to pay if it were earned in the US.
For ex: Say you earned $100,000 in your home country and home country tax rate is 25% so you paid $25,000 tax. But US tax is only 20% so you get $20,000 credit only.
Similarly, if home country tax rate is 15% so you paid $15,000 tax. But US tax is only 20% so you get $15,000 credit only and have to the pay remaining $5000 to IRS.

But, if the offshore income was earned income (means, you actually had a job in your home country and not just business, rental or investment income) then you can claim Foreign Earned Income Exemption. You still need to file a tax return and report the income. More details here - https://www.irs.gov/individuals/inte...come-exclusion

If you just didn't file any return for 2016 & 2017, then you can file delayed returns now and pay any tax liability to get it cleared.
If you filed jointly (with your spouse) for 2016 & 2017 but didn't report your income, then you should file amended returns showing your income.

The main points are:
1) You became US resident in 2016, so you must have tax returns from 2016 onwards
2) You should declare your overseas income and, if applicable, pay any tax liability due on it in the US

You cannot simply say you didn't file because of the tax treaty with your home country. That will not be accepted. You must file a return and claim the exemption based on the tax treaty in the return. Don't stress, it is a not a difficult process. You could probably do it yourself with some research & reading, or any good CPA can do it for you for a couple of hundred $$.

OR, you could take a chance and just go to the interview and hope the IO doesn't ask about your tax returns. If they do, then your case could be delayed till you sort it all out.

Good luck.

[Aharry]

Sorry for the delay but that was very helpful. Appreciate your time.