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London Mayor Settles US Tax Dispute

The strategy of many long term US expats of simply not filing a US tax return, or not being aware they need to file a US tax return, and hoping they fly under the radar is no longer working. Boris Johnson, the flamboyant London mayor born in the US, brought to light the plight of many US expats who have lived almost all their lives abroad.  He moved to London from New York when he was 5 years old and has lived in London for decades. Recently, Mr. Johnson sold his primary residence at a gain. The IRS, under the new Foreign Account Tax Compliance Act (FATCA) rules, found out and requested that he pay capital gain tax on the sale in the US.

 

This has resulted in a politically charged campaign, with Mr. Johnson claiming that the US government has “an incredible doctrine of global taxation” and that he shouldn’t pay Uncle Sam anything since he pays full tax in the UK and has not lived in the US for over 4 decades. The system of taxing on world-wide assets makes many expats feel that they are treated unfairly.

 

The current rules that apply to US expats are so complicated that individual taxpayers can’t keep up. Up until now, the IRS seemed to turn a blind eye to expats who didn’t file. However, provisions of FATCA now require foreign financial firms to disclose information about US account holders to the IRS annually. This means that many US expats who have never filed, will now be required to start filing a US tax return.

 

Mr. Johnson has clearly discovered that not even his powerful political clout could dodge the IRS’s global taxation power, nor sway the US Congress to change the tax law.  He has agreed to pay an undisclosed amount to the IRS and settle the US tax dispute. Mr. Johnson hasn’t said if he will start filing US taxes in the future.