$0 earned income, $13 unearned income: Must I file?

[GP010]

I am grateful for your replies to my previous inquiry posted yesterday ("Does the standard deduction apply to all income including savings account interest income?") Thank you Mike, Critter and NC.

Full disclosure: I am a retired, non-dependent 66-year-old expat (sailing around the world since 2014). I have not filed a US tax return since 2016 because 1) I have no US or non-US earned income, 2) I have no foreign bank account and 3) my inexpert understanding of the standard deduction means there is no requirement to file for my unearned income of about $13.

Frankly, I am alarmed after hyperbolic warnings ("YOU could be required to pay $100,000 and go to jail...") from a "here to help" (for a fee of "from $1,250") tax expert about interest income (and FBAR/FATCA) and reviewing multiple articles about draconian US tax law provoking American expats to renounce their US citizenship.

Is the tax expert right? Does the standard deduction not apply? Do I have to file six years of delinquent tax returns and pay penalties on what amounts to a cumulative payment of 6 years x $1.30 = $7.80 because "...the bank sends a 1099-INT form every year to the IRS"?

[VolvoGirl]

If your income is less than the Standard Deduction (12,550 for Single) you do not have to file a return.  You only had $13 of interest?  You do not have to file a return.  Yes the Standard Deduction applies to all income.  Only if you are a dependent then it is calculated differently.  

IRS Do I need to file?

Do I Need to File a Tax Return? | Internal Revenue Service

See IRS pub 501 for filing requirements

https://www.irs.gov/pub/irs-pdf/p501.pdf

[SteamTrain]

Don't forget that any pension income you are receiving must be included in your taxable income figures (If from a former US-based job.....not sure about pensions from working at overseas companies. Others in this community are far more knowledgeable about that). If you have started receiving US Social Security income, that can also end up as partially taxable income, unless the interest is truly your only income of ANY kind during the year.

_______________________

I'd stay away from any web sites claiming $100k penalties and jail time (this web community should be OK), and a warning to renounce US citizenship is ridiculous nonsense.

[Mike9241]

this is ridiculous in your situation

("YOU could be required to pay $100,000 and go to jail...") from a "here to help" (for a fee of "from $1,250") tax expert about interest income (and FBAR/FATCA) and reviewing multiple articles about draconian US tax law provoking American expats to renounce their US citizenship.

they want your $1,250 or more for which they will provide no real help. they will also have your personal information and possibly your credit card number which can lead to identity theft.  

however,  where does the money come from to pay the expenses you incur. 

[GP010]

@VolvoGirl 

"You only had $13 of interest?"

Right, and it was starting to feel like a poke in the eye with a sharp stick until I read your comment. I feel free again. Thank you very much.

[GP010]

@SteamTrain 

"I'd stay away from any web sites claiming $100k penalties and jail time (this web community should be OK), and a warning to renounce US citizenship is ridiculous nonsense."

Copy that and thank you for guiding me back to the right track SteamTrain. Sadly, renouncing US citizenship due to IRS overreach is a real thing. The US is one of only two nations on earth that require its people to file their taxes, wherever they live. The other one is Eritrea, a one-party dictatorship which voted with authoritarian states Russia, North Korea, Syria and Belarus against the U.N. General Assembly resolution condemning Russia's invasion of Ukraine. No wonder thousands of American expats renounce their US citizenship each year.

[GP010]

@Mike9241 

"where does the money come from to pay the expenses you incur."

short answer: cash

long answer: Retired, sold my house, built a basic, no-frills sailboat (i.e. resource consumption, maintenance and living expenses are minimal). Hope I die before I go broke...

"this is ridiculous in your situation"

Right but US tax code is extremely complicated, often opaque, sometimes illogical and riddled with BIG BROTHER overreach (see comment above about US and Eritrea). There is plenty of space and opportunity in the weeds for good and bad actors.

[pk]

@GP010 , having gone through all the replies and comments above and agreeing with my colleagues @Mike9241 @SteamTrain @VolvoGirl  et al  ----

1. the threats that these sites  talk about are real -- i.e. it is possible  but facts and circumstances dictate the probability of such.  It is like saying in the US there is death penalty -- you could be subject t death penalty -- it is true but they don't tell you before  that you have to be convicted of a serious  crime -- so it is possible  but very low probability in general.

2. You are correct that US is one of the few countries that  tax on citizenship and/or residency while most countries  have only a residency requirement for tax purposes

3. enjoy your good life roaming the world but note that when you leave the international waters , you come under the jurisdiction of the  country whose waters you have entered  and their tax laws may come into effect -- e.g. some countries have wealth tax, VAT, and  other mechanisms  for funding themselves. 

Enjoy