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Hi Funz.

I'm no sort of tax professional, but I do live in Japan, and have been doing the foreign earned income "thing" for 15 years now.

You might want to get in touch with the IRS rep at the US Embassy nearest you. I think you're going to need to go back and file 1040s for the last 10 years. It doesn't matter whether you actually owe anything or not.

However, you're in good company. I think that the IRS has gotten a bit more strict in the enforcement of tax laws in regards to us expats in recent years. Several of my friends who had also never filed taxes were red flagged when they went to renew their passports at the Embassy. Bascially, they couldn't get their passports renewed until they'd caught up on their taxes. Seemed like a major headache, but they didn't have many choices at that point.

The IRS in Italy might not be as strict as in Japan, but once you have a 1099 issued in the US (from your investment earnings) you're going to be in the system, will have to file taxes on those earnings (they won't fall under the foreign earned income clause, not being foreign or earned income) and someone is bound to notice an absence of tax returns under your social security number for the last 10 years. I think you'll be better off if you at least check out your options with the Embassy IRS people before that day arrives. You can do it anonymously.

Good luck!
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