Recent media reports about the London mayor’s tax affairs shine a light on the taxation of US citizens living abroad. David Treitel (American Tax Returns Ltd) explains.
Asked if he would pay his American tax bill, Boris Johnson recently answered: ‘No, is the answer. I think, it’s absolutely outrageous. Why should I?’
Boris is potentially doing our profession a huge favour by sharing publicly the useful knowledge that ‘if you’re an American citizen, America exercises this incredible doctrine of global taxation’. These words said by Boris in a radio interview earlier this month demonstrate an excellent and deep understanding of US tax law, which starts from the basic premise that ‘in general, all citizens of the United States, wherever resident … are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States’ (Treasury Regulation section 1.1-1(b)).
Back in 2012, Boris wrote in The Spectator that he is happily ‘the proud possessor of an American passport’. Boris achieved US citizenship immediately on birth in New York back in 1964 because anyone born in the United States is automatically a US citizen (The Immigration & Nationality Act 1952 s 301(a)).
Might Boris have known sooner about his American tax obligations? Current media reports suggest that Boris is most upset about US tax liabilities on the gain in 2009 on the sale of his former main residence; where such gains are tax-free in the UK, but taxable in the US.
Boris’s accountants wrote publicly in 2012 during the last Mayoral election campaign that Boris ‘is liable to income tax on the entirety of his income and has made all due payments’. It seems curious that Boris could have paid all tax due by 2012, as he is still annoyed today about a liability on something that happened in 2009.
What might Boris do? He appears to have an outstanding US liability. Demonstrating sound reasonable cause might enable Boris to escape penalties for late payment and late filing of US returns. Simply being busy would not be sufficient. Did he perhaps take professional advice that he received and acted on telling him that he was not required to file or pay tax in the United States?
Without a good reasonable cause argument, the IRS offer two possible choices today. Boris might think of using IRS streamlined procedures which could eliminate all penalties. Entering the streamlined procedures would require Boris to argue that his conduct was not wilful. However, ‘wilful . . . is a word of many meanings, its construction often being influenced by its context’ (Spies v United States (1943) 317 US 492, 497).
If there is doubt over wilfulness, Boris might use the more formal offshore voluntary disclosure procedures, which require payment of an asset based penalty to the IRS.
Boris is hopefully acting fast and arranging to pay what he owes. Indeed, his advisers might already be thinking of making a suspicious activity report to the National Crime Agency, now that he has gone on record saying that he will not be paying all of his tax!
Home >Articles > Boris, US tax evader or just a naughty boy?
Boris, US tax evader or just a naughty boy?
Recent media reports about the London mayor’s tax affairs shine a light on the taxation of US citizens living abroad. David Treitel (American Tax Returns Ltd) explains.
Asked if he would pay his American tax bill, Boris Johnson recently answered: ‘No, is the answer. I think, it’s absolutely outrageous. Why should I?’
Boris is potentially doing our profession a huge favour by sharing publicly the useful knowledge that ‘if you’re an American citizen, America exercises this incredible doctrine of global taxation’. These words said by Boris in a radio interview earlier this month demonstrate an excellent and deep understanding of US tax law, which starts from the basic premise that ‘in general, all citizens of the United States, wherever resident … are liable to the income taxes imposed by the Code whether the income is received from sources within or without the United States’ (Treasury Regulation section 1.1-1(b)).
Back in 2012, Boris wrote in The Spectator that he is happily ‘the proud possessor of an American passport’. Boris achieved US citizenship immediately on birth in New York back in 1964 because anyone born in the United States is automatically a US citizen (The Immigration & Nationality Act 1952 s 301(a)).
Might Boris have known sooner about his American tax obligations? Current media reports suggest that Boris is most upset about US tax liabilities on the gain in 2009 on the sale of his former main residence; where such gains are tax-free in the UK, but taxable in the US.
Boris’s accountants wrote publicly in 2012 during the last Mayoral election campaign that Boris ‘is liable to income tax on the entirety of his income and has made all due payments’. It seems curious that Boris could have paid all tax due by 2012, as he is still annoyed today about a liability on something that happened in 2009.
What might Boris do? He appears to have an outstanding US liability. Demonstrating sound reasonable cause might enable Boris to escape penalties for late payment and late filing of US returns. Simply being busy would not be sufficient. Did he perhaps take professional advice that he received and acted on telling him that he was not required to file or pay tax in the United States?
Without a good reasonable cause argument, the IRS offer two possible choices today. Boris might think of using IRS streamlined procedures which could eliminate all penalties. Entering the streamlined procedures would require Boris to argue that his conduct was not wilful. However, ‘wilful . . . is a word of many meanings, its construction often being influenced by its context’ (Spies v United States (1943) 317 US 492, 497).
If there is doubt over wilfulness, Boris might use the more formal offshore voluntary disclosure procedures, which require payment of an asset based penalty to the IRS.
Boris is hopefully acting fast and arranging to pay what he owes. Indeed, his advisers might already be thinking of making a suspicious activity report to the National Crime Agency, now that he has gone on record saying that he will not be paying all of his tax!
