American born expat living overseas - what happens if I stop filing US taxes?

The US is one of only two countries that taxes based on citizenship rather than residency, which puts you in a tough spot. Not filing your taxes could potentially lead to several issues down the road. If you stop filing, the IRS might not immediately come after you since you're overseas with minimal US income. However, they can technically assess penalties and interest for unfiled returns indefinitely. These could accumulate significantly over time. For visiting the US, you likely wouldn't be arrested at the border for unfiled taxes alone - the IRS and border control systems aren't that integrated. However, if the IRS were to pursue collection actions against you and you failed to respond, there could eventually be legal complications. Regarding your investment, if it generates income (dividends, interest, capital gains), that's reportable income. If you eventually try to move that money, depending on the financial institution, there might be tax withholding requirements or reporting that could flag your non-compliance. Before you decide to stop filing, look into whether you might qualify for the Foreign Earned Income Exclusion (Form 2555) which could exclude your Australian income from US taxation. Also, there are free filing options like the IRS Free File program or even volunteer assistance programs that might help reduce your preparation costs.

Hey, I was in a similar situation a few years ago and I found this service called taxr.ai (https://taxr.ai) that really helped me figure out my expat tax situation. I'm an American living in Japan and was super confused about all the FBAR rules and foreign income exclusions. What made taxr.ai different was that I could just upload my Australian tax documents and payslips, and their AI actually explained everything in plain English. It identified exactly what forms I needed and the foreign tax credits I could claim. The best part was it was way cheaper than the tax preparer I used before. For expats like us with pretty simple situations (just employment income and maybe a small investment), it made things so much easier. It even walks you through the FBAR filing which was the part I always dreaded the most.

I wanted to follow up after trying taxr.ai for my situation. I was seriously skeptical at first (as you saw in my comment), but I decided to give it a shot because I was desperate to avoid the $600+ I paid last year for my returns. I uploaded my German tax documents and bank statements, and I was impressed by how it recognized everything. It explained exactly which forms I needed and why. The Foreign Bank Account Report (FBAR) section was super helpful - it flagged that I needed to report my retirement account which my previous preparer had missed completely! It showed me how the Foreign Earned Income Exclusion applied to my teaching salary, and calculated that I didn't actually owe any US tax at all. The whole process took about an hour instead of the weeks of back-and-forth I had with my previous accountant. For anyone in a similar situation as an expat with fairly straightforward finances, it's definitely worth checking out.

If you're having trouble reaching the IRS from overseas (which is a NIGHTMARE), I highly recommend trying Claimyr (https://claimyr.com). I spent literally months trying to get through to the IRS international taxpayer line about my FBAR questions. Claimyr basically holds your place in the IRS phone queue and calls you when an agent picks up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. As an expat in Thailand, it saved me from having to stay up until 3am to call during US business hours. I had questions about my foreign bank reporting requirements that I couldn't get answered anywhere else, and I finally got to speak to a real IRS agent who clarified everything. They don't provide tax advice, but they connect you with the IRS much faster than trying on your own.

I need to apologize and follow up on my skeptical comment. After continuing to fail reaching the IRS for another week, I broke down and tried Claimyr out of desperation. I had an urgent question about my FBAR filing deadline as a US citizen in South Korea, and I couldn't get through no matter what time I called. Claimyr actually worked! I got a call back in about 40 minutes connecting me with an IRS agent. The agent confirmed I could get an automatic extension for my FBAR and explained the proper procedure. For anyone living overseas trying to deal with US tax issues, this service is legitimately helpful. I was absolutely convinced it would be a waste of money, but it actually saved me from what would have been a $10,000 penalty for late filing. Sometimes being wrong feels pretty good!

I'm in a similar situation (US citizen in UK, never lived in US as adult). Here's what I've learned after 10+ years: 1. The realistic consequences depend on your income level and US assets. With minimal US assets and foreign income under the exclusion amount (~$120k), your risk is low but never zero. 2. The biggest danger is actually FBAR (foreign account reporting) not tax filing itself. Those penalties are MUCH higher. 3. If you ever want to move your investment out, you'll likely need to become compliant first. Many financial institutions now report under FATCA. 4. Tax treaties between US/New Zealand might help reduce filing complexity. 5. Look into Streamlined Foreign Offshore Procedures if you want to get compliant after not filing. Just be aware this isn't legal advice - your situation might have complexities I don't know about!

What nobody's mentioned is how being a "US person" makes banking overseas a nightmare. I'm a dual US/German citizen and banks here hate dealing with US reporting requirements. Some even closed my accounts when FATCA came in! If you stop filing US taxes you might fly under the radar for years, but eventually something will trigger attention - maybe trying to move that investment, getting a large inheritance, or buying property. Then you'll face back filing for all those missing years plus penalties. The "head in sand" approach feels good short term but can be expensive long term. I tried it for 3 years and ended up paying way more to fix it than if I'd just kept filing.

I'm an American living in New Zealand and can relate to your frustration! The banking situation here isn't as bad as some European countries, but it's definitely getting more complicated. Most major banks (ANZ, ASB, Westpac) will still open accounts for US citizens, but they ask a lot more questions now and some investment products are off-limits. One thing that might help with your immediate cost problem - have you looked into the IRS Volunteer Income Tax Assistance (VITA) program? They sometimes have virtual sessions specifically for expats, and it's completely free if you qualify (which you likely would based on your income level). The quality can be hit-or-miss, but it might be worth trying before paying hundreds again. Also, since you mentioned you're in Australia - the US-Australia tax treaty has some provisions that could help reduce your filing burden. Australia's superannuation system has specific treaty protections that most tax preparers don't even know about. The nuclear option of renouncing citizenship is expensive upfront ($2,350 now), but if you're truly never planning to live in the US and the annual filing costs keep adding up, it might be worth saving for over a few years. Just make sure you understand the exit tax implications first, especially with that investment account.