Reddit Told Me I Don’t Owe US Taxes. Let’s Break That Down

I spend more time than I should reading expat tax threads on Reddit. Not because the advice is always wrong. Sometimes it is genuinely helpful, and the community of Americans abroad is one of the most generous and well-meaning corners of the internet. But sometimes I see a comment with hundreds of upvotes that could cost someone thousands of dollars, and I feel like I have to say something.

So I want to walk through three real situations that came up in expat forums recently. Real questions, real confusion, and what I would actually tell each of these people if they came to me directly.

“I was born in the US but I have lived in Canada for 21 years. I never filed. Does it matter?”

This one comes up constantly, and I understand why it feels surprising. Someone left the US as a teenager, built their entire life in another country, pays taxes there, has no connection to the American financial system, and yet the US still expects a tax return every year. It does not feel fair, and honestly, many expats and advocates would agree with that sentiment.

But the rule is what it is. The US taxes its citizens on worldwide income regardless of where they live or how long they have been gone. Twenty-one years abroad does not change that obligation. Neither does having never worked in the US.

The good news in this specific situation is that it is very likely not as dire as it sounds. Canada has a tax treaty with the US, and someone who has been living and paying Canadian taxes this whole time will in most cases owe little to nothing in US tax. The Foreign Tax Credit can work to offset US liability using the Canadian taxes already paid. But the filing obligation still exists, and unfiled returns accumulate.

The other thing worth addressing is the renunciation comment. I hear this often from long-term non-filers who feel like renouncing citizenship is a cleaner solution than dealing with years of unfiled returns. It is not, because you generally cannot renounce while you have outstanding tax obligations. You have to get compliant first. Renunciation is something you do after the situation is resolved, not instead of resolving it.

The path forward for someone in this situation is typically the Streamlined Foreign Offshore Procedure, which is designed specifically for US citizens abroad who have fallen behind on filings without willful intent. The process is more manageable than most people expect, and it exists precisely because situations like this one are common. 

“My accountant in Portugal handles my NHR taxes. I assumed my US obligations were covered too.”

This is one of the most common and costly assumptions I see among Americans who have built lives and businesses abroad, and it is completely understandable. You hired a qualified local accountant. They are doing their job correctly. You assumed that meant everything was handled.

The problem is that your Portuguese accountant is handling your Portuguese tax obligations. They are almost certainly not thinking about your US filing requirements, because that is not what they were hired to do. These are two entirely separate systems, and being compliant in one does not mean you are compliant in the other.

In the situation I am describing, a US citizen had been freelancing in Portugal for three years, paid through a Portuguese LLC they had set up. Two separate issues had gone unaddressed. The first was FBAR. If a US citizen has foreign bank accounts that collectively exceed $10,000 at any point during the year, they are required to file a Foreign Bank Account Report separately from their tax return. Three years of unfiled FBARs is a meaningful gap. The second issue was the LLC itself. A US citizen who owns a foreign company triggers additional US reporting requirements beyond the personal return. Depending on the structure and the income, Form 5471 filings may be required, and this is one of the most commonly missed obligations we see.

Is it fixable? In most cases, yes. Three years of unfiled FBARs with no willful intent, addressed proactively rather than reactively, is a very different situation from being found by the IRS. The Streamlined Procedure is available here as well. The penalties that people read about online are largely aimed at people who deliberately concealed assets, not people who genuinely did not understand that two separate compliance systems existed. The worst thing someone in this situation can do is keep waiting.

“I teach at a foreign university. I was in the US for about three months this summer. Do I pass the Bona Fide Residence test?”

I appreciate this question because it shows someone trying to do things correctly. They are not looking for a loophole. They want to know whether they qualify for the Foreign Earned Income Exclusion through the Bona Fide Residence test, and they gave us a lot of detail to work with.

The Bona Fide Residence test is really about where your life is actually rooted: your housing, your ties, your established presence in a foreign country. A long-term foreign resident looks very different from someone who is temporarily working abroad while their real life remains in the US.

This person actually looks like a strong Bona Fide Residence candidate. They have a long-term faculty contract. They own property abroad. They came back to the US for the summer for research purposes and returned abroad in September. That is not someone on a temporary assignment. That is someone whose life is rooted in another country. The key question I would want to dig into is whether they have permanent housing abroad, a place that is genuinely their home base year round. If yes, that picture is pretty compelling.

It helps to contrast this with the classic case that does not pass the Bona Fide Residence test: a corporate employee sent abroad for a one or two year assignment who kept their house in the US, whose family is there, whose whole life remains there. They are temporarily working overseas but the foreign country was never really home. That person was not a Bona Fide resident no matter how many days they spent abroad.

But that does not necessarily mean they are out of options. If they spent 330 days outside the US in a twelve-month period, they may still qualify for the Foreign Earned Income Exclusion through the Physical Presence test instead. That is a separate path to the same destination, and it is exactly why this question genuinely needs a professional looking at the full picture rather than a forum guess. The difference between qualifying and not qualifying for the FEIE can be significant, and the right answer depends entirely on the specific facts.

The pattern across all three

These are three very different situations, but the same underlying dynamic runs through all of them.

A person left the US young and assumed that time took care of their US obligations. A person built a real business abroad and trusted their local accountant to cover everything, not realizing the US operates on a separate track entirely. A person doing everything right, with a genuinely strong case for Bona Fide Residence, but asking a question in a forum where the answer requires more than a day count or a quick read of the facts.

None of these people were trying to avoid their obligations. They were working with incomplete information in a system that is genuinely complicated and poorly understood by most of the advisors expats encounter first.

The gap between what most Americans abroad assume about their US tax situation and what the rules actually require is wide enough to be costly. And unlike many financial problems, expat tax issues tend to compound quietly over time until they do not.

Frequently asked questions (FAQ)

Does living abroad for many years eliminate US tax obligations?

No. The US taxes citizens on worldwide income regardless of how long they have lived outside the country. The filing obligation persists until citizenship or eligible green card status ends. However, tools like the Foreign Earned Income Exclusion and Foreign Tax Credit can in many cases significantly reduce or work to offset what is actually owed.

What is the Streamlined Foreign Offshore Procedure?

It is an IRS program designed for US citizens living abroad who have fallen behind on tax filings or FBAR submissions without willful intent. It allows eligible taxpayers to file delinquent returns and FBARs with reduced or no penalties in most cases. It is one of the most useful tools available for expats who discover they have a compliance gap.

Does owning a foreign company create US reporting obligations?

Yes, in most cases. A US citizen who owns or has a significant interest in a foreign corporation may be required to file Form 5471 as part of their US tax return. This is separate from and in addition to FBAR requirements and personal income reporting. The thresholds and rules vary depending on the ownership structure.

What is the difference between the Bona Fide Residence test and the Physical Presence test?

Both are ways to qualify for the Foreign Earned Income Exclusion. The Bona Fide Residence test looks at where your life is actually rooted: your housing, your ties, your established presence in a foreign country. Someone with a long-term contract, foreign property, and a genuine home base abroad is a strong candidate. Someone on a temporary corporate assignment who kept their house and family in the US is not, regardless of how many days they spent overseas. The Physical Presence test is different: it is based purely on a day count, specifically 330 full days outside the US in any 12-month period. Importantly, someone who does not qualify under Bona Fide Residence may still qualify through Physical Presence, and vice versa. Which path applies and whether you qualify depends on the full details of your situation.

If any of these situations sound close to your own, the most useful next step is a conversation with someone who works on this exclusively. Book a consultation and we will work through where you stand and what the right path forward looks like for your specific situation.