But a common slip-up that some American expats run into when moving to a new country is neglecting their US tax obligations. Yes, you heard that right: even overseas, you must still file an annual US tax return to the IRS. This slip-up is so common that of the ~8 million Americans overseas, only about 17% are filing US tax returns. 

The US is one of the few countries (alongside Eritrea) that applies citizenship-based taxation. US expats must declare their worldwide income and foreign assets to the IRS regardless of where they live. 

So what do you do if you’ve been living overseas for some time and have never filed a US tax return (or you’re simply behind)? Does that mean the IRS may penalize you? 

Thankfully, this is where the Streamlined Filing Compliance Procedure program comes in. 

In this article, we’re going to answer the six most common questions we get from our clients when it comes to understanding the Streamlined Procedure and how it applies to Americans living abroad:

1. What is the Streamlined Filing Compliance Procedure? 
2. Who is eligible for the Streamlined Filing Compliance Procedure? 
3. How do I file the Streamlined Filing Compliance Procedure?
4. What is the IRS standard for willfulness? 
5. Will I pay penalties when filing the Streamlined Filing Compliance Procedure? 
6. How long does the Streamlined Filing Compliance Procedure take? 

Let’s dive in.

1. What is the Streamlined Filing Compliance Procedure?

Only 17% of Americans living overseas are filing their tax return. Many US expats living abroad aren’t aware of their US tax obligations and, as a result, have never declared their worldwide income or foreign assets. 

“Over the past ten years, I’ve spoken to thousands of Americans living outside the US who learned of their IRS tax filing obligation out of sheer coincidence. Some have been informed by their local banks, others by a friend, and in some cases, a news article reveals that they’ve overlooked an important tax responsibility. The recurring theme here is that many people aren’t filing US taxes because they don’t know they have to. It’s not because they don’t want to, or are trying to hide something from US tax authorities.”

– Katelynn Minott, Bright!Tax CEO, CPA 

The Streamlined Filing Compliance Procedure is an IRS program, originally introduced in September 2012, that helps US expats catch up on their taxes, penalty-free. 

2. Who is eligible for the Streamlined Filing Compliance Procedure? 

Here’s a quick rundown on the eligibility criteria for the Streamlined Filing Compliance Procedure:

Your tax noncompliance was not willful

You must state under penalty of perjury that your failure to comply with your US tax obligation wasn’t intentional. In other words, your noncompliance was from a mistake or a lack of understanding of your US tax obligations overseas. 

The IRS must not have initiated a civil investigation on any of your tax years

If you’ve been under civil investigation (i.e. an audit) from the IRS before for tax evasion, you won’t be eligible for the Streamlined Filing Compliance Procedure.    

You have a valid taxpayer identification number

To submit your returns under the Streamlined Filing Compliance Procedure, you’ll need a valid taxpayer identification number (ITIN) or Social Security Number (SSN). For American citizens who have (or are eligible for) an SSN, it is not possible to file the Streamlined Procedure with an ITIN. If you’re not eligible for an ITIN and SSN, then the IRS won’t process your returns under the compliance program. 

You haven’t had ‘residency’ in the US for one or more of the three previous tax years

There are two versions of the Streamlined Filing Compliance Procedure: domestic and offshore. 

To be eligible for the offshore Streamlined Filing Compliance Procedure, you must certify to the IRS that you haven’t had a place of residence in the US for the last three years. Or, you must have been physically present for 330 days outside the US during one or more of the previous three tax years. 

3. How do I file the Streamlined Filing Compliance Procedure?

Though the breakdown feels somewhat simple, there can be a bit of heavy lifting involved in each step. Here’s what you’ll need to submit to the IRS in order to file the Streamlined Filing Compliance Procedure:

Get caught up on your three most recent tax returns

You must file your three previous years of tax returns – again, reporting your worldwide income.  

Some forms you might need:

• Form 2555: This is the form you can file to claim the Foreign Earned Income Exclusion (FEIE)² and reduce your US tax liability. With this form, you can exclude up to $112,000 of your foreign-earned income from your tax return.  
• Form 116: You can use this IRS Form to claim the Foreign Tax Credit (FTC)³, another tax relief plan. The FTC allows you to gain tax credits on a dollar-for-dollar basis based on the foreign taxes you’ve already paid.  
• Form 8938: Also called the Statement of Specified Foreign Assets⁴, you’ll have to file this Form if the total value of your foreign financial assets exceeds $300,000 at any point in the tax year ($600,000 if you file jointly). 
• Form 8833: The Treaty-Based Return Position Disclosure⁵ is to claim any benefits from the US tax treaty with your country of residence. Want more information on this to see if your country is eligible? Read more here. 

File your FBAR Forms from the six previous years

Typically, US expats only file an FBAR (Foreign Bank Account Report) if the money in their foreign financial accounts exceeds $10,000 at any point in the tax year. However, under the Streamlined Filing Compliance Procedure, you’ll have to file an FBAR for the six previous years.

A signed “Certification by US Person Residing Outside of the US” statement (Form 14653)

With this statement, you confirm to the IRS that:

• You’re eligible for the Streamlined Filing Compliance Procedure
• You filed all of the required FBAR forms 
• The failure to not comply with your tax obligations was not intentional.

Read more: How to File Form 14653 | Bright!Tax

4. What is the IRS standard for willfulness?

The IRS considers non-willful noncompliance as any “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.” Again, any behavior that clashes with this standard will disqualify you from the Streamlined Filing Compliance Procedure. 

For example, some people are “Accidental Americans,” which was the case for former UK Prime Minister Boris Johnson⁶. These people may have been born in the United States but left the country very young or had a parent register them abroad with a US consulate. They often have no ties with the US.

Additionally, Accidental Americans are often unaware of their US tax obligations since they’ve spent most of their life overseas. Consequently, the IRS qualifies their behavior as non-willful noncompliance, which makes them eligible for the Streamlined Filing Compliance Procedure. 

5. Do I pay penalties with the Streamlined Filing Compliance Procedure?

As mentioned, there’s good (great!) news. The foreign version of the Streamlined Filing Compliance Procedure allows you to catch up on your taxes without paying any penalties. 

If you’re behind on your US taxes but qualify for the Streamlined Filing Compliance Procedure, there’s no better time than now to start the program. If the IRS comes to you first, you’ll be ineligible. Under Foreign Account Tax Compliance Act (FATCA)⁷, countries are under the obligation to report the financial activities of US expats, so it’s best to get started early (read: before the IRS contacts you). 

6. How long does the Streamlined Filing Compliance Procedure take?

Typically, it takes the IRS around 90 and 120 days to process your streamlined tax returns. However, due to the backlog caused by the pandemic, the process could take up to a year or longer.

Read more: Expert Advice on Dealing with the IRS Backlog | Bright!Tax

Let Bright!Tax help you catch up on your taxes

Moving overseas to start over in a new country is an exciting opportunity. Filing your taxes? Yeah, not as fun!  

Managing your taxes can feel overwhelming, especially when you’re in the process of adapting yourself to a new country. 

That’s where we can help. At Bright!Tax, our CPAs help guide our clients through each step of the Streamlined Filing Compliance Procedure and handle all of their tax filings to give them peace of mind. Contact us today to learn more.

References

1. American Expats by Country 2023 (worldpopulationreview.com)
2. Foreign Earned Income Exclusion | Internal Revenue Service (irs.gov)
3. Foreign Tax Credit | Internal Revenue Service (irs.gov)
4. About Form 8938, Statement of Specified Foreign Financial Assets | Internal Revenue Service (irs.gov)
5. About Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) | Internal Revenue Service (irs.gov)
6. Boris Johnson among record number to renounce American citizenship in 2016 | Boris Johnson | The Guardian
7. Foreign Account Tax Compliance Act (FATCA) | Internal Revenue Service (irs.gov)

The post Streamlined Filing Compliance Procedure: The 6 Most Frequently Asked Questions (and Answers!) appeared first on Bright!Tax Expat Tax Services.

Filing your taxes late often comes with penalties for each month you’re late. There are also additional penalties if you end up owing taxes to the US Government. But, if you’re a US expat, there’s a way to catch up on your tax returns without worrying about penalties stacking up. It’s called the Streamlined Procedure.

Americans living abroad who weren’t aware of the tax filing requirement or deadline could avoid penalties with the Streamlined Procedure. Part of this process includes submitting IRS Form 14653. But what exactly is this tax form and how do you qualify for this tax amnesty program? We’ll explain how Form 14653 could help you get back on track and meet your tax requirements, without worrying about IRS late fees.

What is the Streamlined Procedure?

Before filling out Form 14653, you should understand the Streamlined Procedure and all of its requirements. Short for the Streamlined Filing Compliance Procedures, this process functions as a tax amnesty program for US expats. It’s offered to help Americans living overseas catch up on their taxes, without fear of penalties. 

Through the Streamlined Procedure, you file three past due tax returns. You must also file your last six years of FBARs (Report of Foreign Bank and Financial Accounts), if required. If you own a business, you can also use this process to catch up on past-due business filings, such as the Foreign Disregarded Entities (FDE), Foreign Corporation disclosures, and foreign partnership disclosures. 

In order to qualify for the Streamlined Procedure, you must meet a few criteria. First, you must have a Taxpayer ID number (such as a Social Security Number). Next, the IRS must not have already contacted you about failing to file a previous return. Lastly, you must attest that you did not file due to non-willful conduct. This means you did not file your US taxes because you were unaware that you needed to or you did not know the deadline had passed. This is when Form 14653 comes into play.

What is Form 14653?

This IRS form must be filled out so that you can file for amnesty under the Streamlined Procedure. The official name of Form 14653 is: Certification by US Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures.

Form 14653 certifies that your failure to file your taxes was not a willful act, which means you did not purposefully avoid filing. Any US expat hoping to receive tax amnesty through the Streamlined Procedure must fill out this form.

When you sign this form, you’re signing under penalty of perjury. This means you’re attesting that the information in the form is accurate. If the IRS finds inaccuracies in Form 14653, you could face fines for perjury. 

How to Complete IRS Form 14653

When you file past returns through the Streamlined Procedure, you have to submit delinquent or amended returns along with this form. Since you’ll need information from these tax returns to fill out Form 14653, it’s better to start with your past-due tax returns and then fill out this form last.

Form 14653 is three pages long and has a few distinct sections. First, you’ll start by filling out your personal information. This includes: 

• Your full legal name, as it appears on your Social Security Card
• Your taxpayer ID number (for most people, this is your SSN) 
• You phone number
• Your current mailing address

Then, you’ll list the tax return years you’re filing (in sequential order), followed by the amount of tax and any interest you owe. Lastly, you’ll total up your balances.

If you’re a legal US citizen or resident, you’ll certify if you were outside of the US for 330 days for the tax years of your delinquent returns. If you’re not a legal citizen or resident, you’ll attach an explanation of why you did not meet the substantial presence test under I.R.C. sec. 7701(b)(3). This computation must include the number of days you were in the US for all three years included in your Streamlined Procedure filing. 

At the bottom of page two, you’ll fill out the personal certification section. Here, you’ll provide the reasons why you did not file your tax returns or pay past-due taxes. You should include:

• All reasons why you did not report your income, pay taxes or submit required tax returns and other documents. The IRS asks filers to include all factors, both favorable and unfavorable. These reasons should include details about your individual background, including personal and financial factors.
• An explanation of where the funds in your foreign bank accounts came from and other details on withdrawals, deposits, and reasons for opening the account. It should also include investment and management decisions and the name and contact information of your professional advisor (if you used one).
• Separate explanations of reasons for married filers submitting jointly. 

Lastly, you’ll finish the form by certifying the statements in the form are true (to the best of your recollection) by signing and printing your name and the current date. If someone else prepares your tax forms, they will provide their information below yours. You are signing under penalty of perjury. So you should review and confirm all data is accurate before submitting it to the IRS.

While you can fill out and submit this form on your own (along with your delinquent tax returns and FBARs), if you have any questions about the Streamlined Procedure, Bright!Tax is eager to help! Our expert CPAs can guide you through each step – either through a paid consultation or our Streamlined service offering (they’ll fill out the paperwork for you!). 

What does non-willfulness mean?

It’s important to understand the IRS’s definition of non-willfulness before filling out Form 14653. In order to certify that your failure to file was non-willful, you must not have filed due to good faith misunderstanding or lack of knowledge of the tax requirements.

If you blindly ignored the tax due date, you do not qualify for tax amnesty. So, for example, if you knew you needed to file taxes as an American living in Dubai, but never looked into it when taxes were due, your failure to file would be considered willful. In this case, you would not be able to file under the Streamlined Procedure. And you would be on the hook for any penalties accrued.

However, if you moved abroad in 2021 and did not realize Americans living outside of the US needed to file US taxes, your conduct would be considered non-willful and you might qualify for the Streamlined Procedure.

How long should your certification statement be?

When writing your personal certification statement, it can be tempting to write pages to include all of the relevant contexts. However, all the IRS is looking for here are the individual factors that prevented you from filing your tax return or paying your taxes on time. 

While including all relevant information is important, be concise, when possible. You should reread your statement a couple of times to edit it and pare it down, if needed. You’ll also confirm all the information is accurate.

Partnering with an experienced CPA from Bright!Tax can help you develop a polished, well-formatted certification letter that can improve your chances of receiving amnesty through the Streamlined Procedure.

Should you consider the Streamlined Procedure?

If you have past-due tax returns you haven’t filed and you’re an American citizen living abroad, the Streamlined Procedure is worth considering. As long as you did not file due to ignorance of the requirement, this filing procedure can help you avoid penalties.

In fact, if you qualify, the IRS will waive all tax penalties you might otherwise face for the specified filing years. So, if you did not file your 2019, 2020 and 2021 taxes because you were unaware expats had to file US taxes and you qualify for the Streamlined Procedure, you would not owe the IRS penalty fees for 2019, 2020 and 2021. You would, however, still have to pay any taxes you owe the US Government.

Bright!Tax Can Help you File Form 14653

Navigating the Streamlined Procedure can be tricky. Especially since you have multiple tax returns and possibly some FBARs to file. Completing Form 14653 and fine-tuning your certification statement can also feel overwhelming.

Bright!Tax has nailed down the easiest way to help you complete the Streamlined Procedure. We also make sure Form 14653 is accurate and complete. Our simple four-step process makes it easy for you to get organized and stay involved throughout the process.

First, you’ll register and connect with your Bright!Tax CPA. Then, we’ll let you know which tax documents to upload to our secure Client Organizer. After that, an experienced CPA will prepare your US expat tax returns. Finally, we’ll send you a draft of your tax returns to review and approve. After approval, you’ll receive your final files to print, sign, and mail into the IRS. (Unfortunately, eFiling isn’t available with the Streamlined Procedure!)

Connect with Bright!Tax today to get started and to stop worrying about IRS penalties.

The post Get Caught Up with the Streamlined Procedure: How to File Form 14653 appeared first on Bright!Tax Expat Tax Services.

This means that American citizens abroad often have to file two tax returns. The tax treaties that the US has with around 100 other countries don’t mitigate the risk of double taxation either, as they contain a ‘saving clause’ meaning American expats still have to file.

The requirement for expats to file has been around since the Civil War, when taxpayers started fleeing abroad to avoid the fighting but the government still needed their tax revenue.

However it’s only in the last few years that the IRS has been able to enforce the requirement globally, due to both a raft of tax information sharing agreements with foreign governments, and the Foreign Account Tax Compliance Act (FATCA), which requires foreign banks and investment firms to share their American account holders’ account details. So it’s no longer a viable strategy for expats to assume that they are ‘under the radar’ and so not file.

Need to file US taxes late?

Many expats however still aren’t aware that they have to continue filing US taxes from overseas, perhaps assuming that they are protected by a tax treaty or other mechanism. In fact, although American citizens have to file, when they do they can claim one or more IRS exemptions that alleviate the US tax burden, often to zero.

Expats who have been living abroad for a while unaware of the requirement for them to file US taxes from abroad may need to file US taxes late to catch up.

Expats who just need to file one or two years late can simply back file the missing tax returns.

Under the Streamlined Procedure amnesty program, expats can also claim the IRS exemptions that reduce their US tax liability, in most cases to zero. Expats who file US taxes late under the program don’t face any penalties or fines, so long as they do so voluntarily before the IRS contacts them.

US tax exemptions for expats

Some expats may be better off claiming the Foreign Earned Income Exclusion by filing form 2555, which simply allows them to exclude the first around $100,000 of their income (the threshold rises a little each year due to inflation) from US taxation, providing they can meet IRS criteria to prove that they live abroad.

FBAR filing

As well as filing a US tax return, expats are required to report any foreign financial accounts they have signatory authority or control over if the combined balances of all their qualifying foreign accounts exceeds $10,000 at any time during a year. This filing requirement is known as a Foreign Bank Account Report, or FBAR.

A final thought

Filing US taxes from abroad is typically more complex than filing from in the US, and we recommend that expats who need to file US taxes late seek assistance from an expat tax expert to ensure that they achieve full compliance and that they are filing most beneficially given their circumstances.

The post Need to File US Taxes Late? What US Expats Need to Know appeared first on Bright!Tax Expat Tax Services.

As a US citizen or permanent resident living overseas, getting a handle on your tax responsibilities is essential. The program offers a streamlined process for expats to catch up on their US tax obligations.

In the following article, we explore how this option facilitates peace of mind from the IRS. In some cases, catching up using the SLP can even yield tax savings.

Reviewing the basics: Who needs to file US taxes (and why)?

The US uses a citizenship-based taxation model.

This means that US citizens and Green Card holders are required to file annual tax returns if their worldwide income exceeds the IRS-defined annual minimum threshold.

These amounts adjust each year with inflation and are aligned with your tax filing status.

You might think that you’re off the hook if your income is below these amounts. However, filing can sometimes be financially advantageous, especially if you anticipate a refund from the IRS.

For example, you might want to file if:

• You’ve had taxes withheld from your paycheck
• You’ve made estimated tax payments
• You’re eligible for refundable tax credits

Related: 2024 Tax Changes: IRS Updates for US Taxpayers Overseas

Evaluating a streamlined process: What exactly are the Streamlined Procedures?

Consider the Streamlined Filing Compliance Procedures as your opportunity to “get back on track” with tax compliance. This program is designed to help eligible taxpayers who’ve unintentionally missed some tax filings catch up without the usual penalties.

To take advantage of this program, your failure to file must be “non-willful,” which we’ll explain in more detail later. 

The evolution of the Streamlined Filing Compliance Procedures

Prior to this program, the only option available was the Offshore Voluntary Disclosure Program (OVDP), known for its lack of leniency. In 2010, the introduction of the Foreign Account Tax Compliance Act (FATCA) resulted in a spike in non-compliance cases, causing outrage in the global expat community.

In response to the need for a more user-friendly solution, the IRS introduced the Streamlined Filing Compliance Procedures in 2012.

Two paths to tax compliance: Understanding your streamlined options

Two types of Streamlined Filing Compliance Procedures exist. Depending on your US residency status, you’ll choose between: 

1. The Streamlined Domestic Offshore Procedures (designated for US taxpayers residing within the US), and
2. The Streamlined Foreign Offshore Procedures (intended for taxpayers living abroad e.g. expats). 

Below is a breakdown of what each option entails. Both aim to facilitate a smooth return to tax compliance, though they have different rules and penalties based on residency.

Who qualifies for the Streamlined Procedures? Your quick checklist

Wondering if the Streamlined Filing Compliance Procedures are right for you? Here’s a quick rundown of the criteria you’ll need to meet to take advantage of this helpful program.

1. Your failure to file must be considered “non-willful,” indicating it was due to an honest mistake or oversight. The IRS defines non-willful conduct as a result of a mistake, inadvertence, a good-faith misunderstanding of the requirements, or negligence.
2. You shouldn’t be under any IRS civil examination or criminal investigation. If you are, this program isn’t an option for you.
3. If you’ve had any penalty assessments for delinquent or amended returns in the past, they must be paid in full.
4. You’ll need a valid Taxpayer Identification Number (TIN), which is usually your Social Security Number (SSN). If you don’t qualify for an SSN but do qualify for an Individual Tax Identification Number (ITIN), you can still be considered for the program.
5. If you’re not a US citizen or permanent resident, you must not have met the “substantial presence test”¹ for any of the last three years.

Additional criteria apply if you’re filing the foreign version of the procedure, the Streamlined Foreign Offshore Procedures. To qualify, you must:

• Be a US citizen or permanent resident and not have had a US residence for at least one year out of the most recent three.
• Be a US citizen or permanent resident and have been outside the US for at least 330 full days during one of the three tax years you’ll be filing for.

Resources for Accidental Americans

If you’ve found yourself with US citizenship but have never lived or worked in the States, you might be scratching your head about your tax obligations. Don’t worry; the Streamlined Filing Compliance Procedures have got you covered.

Accidental Americans often discover their US tax obligations late in the game, usually because they were born in the US to foreign parents or acquired citizenship through a US parent. If this sounds like you, here are some resources to help you navigate this unique situation.

Websites and online tools

• IRS Website: The IRS has a dedicated section for Accidental Americans, offering guidelines and FAQs to help you understand your tax obligations.
• Streamlined Filing Compliance Procedures Page: This is your go-to source for all things related to the Streamlined Procedures, including eligibility criteria and filing instructions.
• Taxpayer Advocate Service: This independent organization within the IRS can help you resolve issues and provide free tax advice.
• Bright!Tax Blog: Our blog offers a wealth of information tailored for Accidental Americans, from detailed guides to expert advice.

Professional help

• Certified Public Accountants (CPAs): A CPA specialized in expat taxes can guide you through the filing process and ensure you’re taking advantage of all available tax benefits.
• Tax Attorneys: If you’re facing more complex issues, a tax attorney can provide legal advice and representation.

Community support

• Expat Forums and Social Media Groups: These platforms offer a wealth of shared experiences and advice from fellow Accidental Americans.
• Accidental American Associations: Organizations like the Association of Accidental Americans provide advocacy and support.

Remember, being an Accidental American doesn’t mean you have to navigate the US tax system alone. These resources are here to help you every step of the way!

Recapping the benefits of catching up on US taxes

Wondering what’s in it for you when you catch up on your taxes through the Streamlined Filing Compliance Procedures? Let’s talk benefits: 

1. Peace of mind: No more sleepless nights worrying about IRS penalties or audits. This program offers a penalty-free way to become tax-compliant.
2. Financial savings: Avoid the hefty fines that usually come with late tax filings. Plus, you may be eligible for benefits like the Foreign Earned Income Exclusion or the Foreign Tax Credit.
3. Tax credits and stimulus payments: Some expats discover they’re eligible for additional benefits like the Child Tax Credit or, for a limited time, Stimulus Payments.
4. Simplicity: The Streamlined Procedures are designed to be straightforward, making it easier for you to file your taxes without the headache.
5. Legal safety: By becoming compliant, you reduce the risk of legal repercussions, giving you one less thing to worry about.
6. Future-proofing: Once you’re caught up, maintaining your tax compliance in the future becomes a breeze.

Stress-free tax filing is at your fingertips.

Feeling overwhelmed by US expat taxes? Let Bright!Tax guide you through the Streamlined Filing Compliance Procedures, so you can get back to enjoying your life abroad, stress-free.

Meet Your CPA

References

1. Substantial Presence Test

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The US has a citizenship-based taxation system, so all US citizens have to file US taxes, wherever they live or earn.

When expats file, they can claim certain credits and exclusions that most often reduce their US tax bill to zero, as long as they file and claim them. If they don’t file on the other hand, they are considered to owe US taxes on their worldwide income, and may be subject to late penalties, too.

There is however a way for Americans living abroad who didn’t realize or understand that they have to file US taxes from overseas to catch up.

In the last few years, the US government has developed the ability to access Americans expat’s finances.

In particular, a law called FATCA has provided access to expats’ foreign bank and investment account information, including balance and contact details, while foreign governments are also sharing expats’ taxpayer information.

This means that it’s no longer possible to be ‘off the radar’ of the IRS; sooner or later, they are likely to get in touch. After they do get in touch, it’s no longer possible to use the Streamlined Foreign Offshore Procedures and so avoid back taxes and fines.

Streamlined Foreign Offshore Procedures Requirements

To catch up using the Streamlined Foreign Offshore Procedures, you have to meet certain criteria:

Non-resident

Americans have to maintain a presence abroad to use the program. This means either being a Bona Fide Resident of another country, or spending 330 days outside the US in a 365 day period that is normally the tax year.

Non-Willful

Expats also have to self-certify that their previous non-compliance was non-willful, meaning due to ignorance or misunderstanding, and provide a statement to self-certify this.

Voluntary

As already mentioned, the Streamlined Foreign Offshore Procedures program is only available on a voluntary basis, before the IRS contacts you.

3 tax returns

Expats must file their last three past due US Federal tax returns. When you file, you can claim credits and exclusions retroactively, meaning that most expats don’t end up owing any tax, and many in fact receive unexpected refunds of a greater value than the cost of becoming compliant.

As part of the Streamlined Foreign Offshore Procedures program, you have to file FBARs for any of the last 6 years in which your combined foreign account balances exceeded the threshold.

Keep filing

Finally, the program requires you to keep filing in subsequent years after having gotten caught up.

How to get started with the Streamlined Foreign Offshore Procedures

All expats’ situations are different, and it’s important to seek guidance from an expat tax specialist before filing, to ensure that the Streamlined Foreign Offshore Procedures is the best path to compliance for you and, if it is, to ensure you file in your optimum interests.

The post Streamlined Foreign Offshore Procedures Lets Late Expat Filers Catch Up appeared first on Bright!Tax Expat Tax Services.

As the IRS stepped up its enforcement of America’s citizenship-based taxation system, which requires all US citizens (and green card holders) to file US taxes on their worldwide income wherever in the world they live, it also realized that it needed a way to allow those Americans living abroad who weren’t actively avoiding taxes to become compliant without treating them like criminals.

The result was the Streamlined Procedure, an amnesty program for the many US expats who are behind with their filing because they weren’t aware of the rules requiring them to file US taxes from abroad.

Who’s it for?

The Streamlined Procedure is intended to allow expats who need to catch up with at least 3 previous years of their US tax filing from abroad. If you’ve missed just one or two tax years, you can normally just back file the missed years.

– File their last 3 missed tax returns
– File their last 6 FBARs (if required)
– Pay any tax and interest due
– Self-certify that their previous failure to file was non-willful

Regarding the third requirement, to pay any tax and interest due, it should be noted that there are several exclusions and credits available for expats that reduce most expats’ US tax liability to zero.

These include the Foreign Earned Income Exclusion, which allows expats who can prove that they live abroad to exclude the first around $100,000 of their earned income from US taxes, and the Foreign Tax Credit, which allows expats to claim a $1 US tax credit for every dollar equivalent of tax that they’ve already paid in another country.

The question of whether an expat’s previous non-compliance was willful or not can be a sensitive one. If the IRS has any reason to believe that an expat was willfully avoiding filing or paying taxes, then they may still be prosecuted in the future. This could happen if the IRS believes that the expat was moving money suspiciously between accounts, for example.

The majority of expats need to catch up because they genuinely weren’t aware of the requirement to file from abroad though.

There are in fact three excellent reasons why expats in this sitaton should catch up using the Streamlined Procedure:

1 – Avoid penalties

Since FATCA (the 2010 Foreign Account Tax Compliance Act) came into effect, almost all foreign banks and other foreing registered financial firms are providing the IRS with details about their American account holders, including balances, directly, giving the IRS the ability to enforce US tax filing globally

2 – Peace of mind

Peace of mind is arguably the biggest benefit expats gain from catching up with their US tax filing and so becoming compliant. Being behind with one’s tax filing is inevitably a worry. Does the IRS know where I live? (Yes!) Will they get in touch? (Probably, at some point). The peace of mind that accompanies knowing that your taxes are done and you are up to date and on the right side of the law is a major factor in many expats’ decision to catch up with their US tax filing.

3 – It’s easier than you think

While filing taxes from abroad is typically more complex than filing from the US, due to having to claim exemptions (and sometimes tax treaty provisions) and the extra filing requirements such as FBAR filing, expats can seek help with the process from an expat tax specialist firm.

The IRS Streamlined Procedure remains an excellent opportunity for expats who were genuinely unaware of the requirement to file US taxes from abroad to catch up in 2021.

The post How Expats Can Catch Up with US Tax Filing Using the IRS Streamlined Procedure in 2021 appeared first on Bright!Tax Expat Tax Services.

Many expats realize this after already having been living abroad for some time, along with the realization that they may face IRS penalties.

What is the Streamlined Procedure?

Thankfully, there’s an IRS amnesty program called the Streamline Procedure that allows Americans living abroad who have missed multiple years’ US tax filing to catch up without facing penalties and neither, in most cases, owing back taxes.

To qualify, it’s important that expats take steps to catch up as soon as they realize that they should have been filing, as the program is only available for those who have missed previous filings unintentionally and non-willfully, through prior ignorance of the rules.

Furthermore, the Streamlined Procedure program is voluntary, meaning it can’t be used if the IRS contacts you about your missed filings first.

What does non-willful mean?

Non-willful means that you haven’t been filing from abroad because you weren’t aware, or didn’t understand , that you had to.

They must also file Form 14653, which contains the non-willfulness statement.

An FBAR is a Foreign Bank Account Report, required for any year in which an American has over $10,000 in total in the foreign bank, pension, and investment accounts that they have signatory authority over. If you’re not sure whether you should be filing an FBAR, always seek advice, as the IRS can access foreign bank data and non-filing penalties are steep.

Will I have the opportunity to discuss my circumstances and the filing process with an accountant?

When you choose to work with Bright!Tax to catch up with your US tax filing with the Streamlined Procedure program, you have the opportunity to fully discuss your circumstances and the process in depth with your Bright!Tax, expat-expert, American CPA at the outset.

Will a single accountant be working on my filings?

Your Bright!Tax CPA will always be your single point of contact, and you can communicate with him or her at any time. They are supported by a wider admin team, who will also be available and enthusiastic to assist you throughout the process.

Will you provide guidance on writing my non-willfulness statement?

While everyone’s situation is unique, we will be happy to advise and assist you when you write your non-willfulness statement on Form 14653.

How will I upload my documents to you?

Our secure online client organizer identifies which files you need to upload, and includes a secure document upload (and download) function.

One of the downsides of the Streamlined Procedure is that you have to mail the Streamlined tax forms to the IRS (although the FBARs can be e-filed). After we prepare your US tax returns and, you approve them, you can sign a Power of Attorney form that will allow us to contact the IRS on your behalf to confirm that they have been processed.

If you have any further questions about the Streamlined Procedure, don’t hesitate to get in touch, or, if you’re ready, simply register here.

The post Streamlined Procedure FAQs for US Expats appeared first on Bright!Tax Expat Tax Services.

The requirement for Americans living abroad having to file US taxes on their global income was introduced way back during the Civil War, however it’s only in the last few years that the IRS has developed the means by which to enforce the requirement globally.

This is possible due to information sharing agreements signed with foreign governments, and a US law called the Foreign Account Tax Compliance Act (FATCA), which compels foreign banks and investment firms to report their American account holders directly to the US government.

This means that the IRS is now able to identify and contact Americans abroad who may not be filing US taxes.

Unfortunately, international tax treaties don’t prevent expats from having to file, either.

The good news is that the majority of Americans who file from abroad don’t end up owing any US tax, as long as they file on a timely basis.

Filing US taxes from abroad

All American citizens have to file a US tax return, reporting their global income.

If any tax is due, it should still be paid by April 15 though. Which credits or exclusions are most beneficial depends on each expat’s personal circumstances.

Additionally, expats often have to report their non-US registered bank accounts, investments, and business interests. They may also have to file state taxes in the state where they last lived, depending on the rules in that state, the expat’s ties to the state, and whether they intend to return.

Consequences of not filing US taxes from abroad

With the IRS able to access expats’ foreign tax and financial details globally, it is also able to apply penalties.

Expats who don’t file a US tax return and claim US credits and exemptions are considered to owe US tax on their global income, regardless of whether they pay foreign taxes. This US tax bill can be hard to get out of if the IRS contacts the expat before they’ve caught up with their back tax filing voluntarily. If the IRS believes that an expat owes more than $50,000 in US back taxes, it can also block the issuance or renewal of one’s US passport.

Penalties for not reporting bank accounts and investments are particularly steep, starting at $10,000 a year for unintentionally not filing (or for partial filing).

As part of this process, Americans can retroactively claim exclusions and credits that most often will reduce their US tax bill to zero.

The Streamlined Procedure also involves submitting a ‘non-willfulness’ statement to explain why the expat didn’t file previously, most often because they weren’t aware of or didn’t fully comprehend the rules.

To ensure that you avoid penalties and file to your most beneficial outcome, please seek advice from a US expat tax specialist at your earliest convenience.

The post Filing US Back Taxes Late from Abroad appeared first on Bright!Tax Expat Tax Services.

The reason that Americans abroad have to file US taxes is that the US taxes all US citizens, regardless of where in the world they live or where their income is sourced. Unfortunately, neither international tax treaties nor whether they pay foreign income taxes in another country prevent expats from having to file US taxes.

Due to international information sharing agreements and a 2010 US law known as FATCA (the Foreign Account Tax Compliance Act), the US can now access Americans’ foreign bank balances and tax information and so see who should be filing.

Fortunately for late filers, the IRS has an amnesty program called the Streamlined Procedure that allows American expats who are behind with their US tax filing from abroad because they didn’t realize that they had to file to catch up.

So how can Americans who are behind catch up using the Streamlined Procedure in 2021?

The Streamlined Procedure in 2021 – no penalties

The Streamlined Procedure in 2021 – no back taxes

When American expats catch up with their US tax filing using the Streamlined Procedure in 2021, they can retroactively claim IRS provisions to reduce their US back tax bill, very often to zero, for the years that they missed.

Americans who pay foreign income tax in the foreign country where they live can claim the Foreign Tax Credit by filing Form 1116. The Foreign Tax Credit allows them to claim US tax credits to the same value as the foreign tax that they’ve paid.

For the many expats who pay foreign income tax at a higher rate, this will reduce their US tax bill to zero and give them excess US tax credits that they can carry into years forward.

How to file under the Streamlined Procedure in 2021

To catch up using the Streamlined Procedure in 2021, Americans abroad must:

– File their last three years’delinquent (or past due)US tax returns

– File their last six years of past due Foreign Bank Account Reports (FBARs, for applicable years)

– File Form 14653 to self-certify that their previous non-compliance with US tax rules was inadvertent

If you’re an American abroad who is behind with your US tax filing, seek advice from a US expat tax specialist today to find out the best way forward given your situation.

The post The IRS Streamlined Procedure For American Expats in 2021 appeared first on Bright!Tax Expat Tax Services.

US law though requires all Americans to file US taxes, regardless of where they reside, and reporting their total global income. They also often have to report any foreign registered businesses, bank accounts, and investments that they may have.

By the time many US expats discover this, they have often missed filing for at least a year.

Fortunately, the IRS has a number of amnesty programs available for Americans living abroad.

Expats who have missed just one year, or sometimes even two years of filing may be able to simply back file. It’s always worth seeking advice from an expat tax specialist though to ensure that you choose the best way to catch up based on your particular circumstances.

In this article we look at some of the different IRS amnesty programs available for Americans living abroad.

The Voluntary Disclosure Practice

The Voluntary Disclosure Practice is available to expats if the IRS hasn’t contacted them yet.

It is most beneficial for expats who believe that the IRS might infer that they have been intentionally avoiding paying or filing US taxes.

Expats can claim the Foreign Earned Income Exclusion or the Foreign Tax Credit for past years, which means most won’t owe any back taxes.

When expats catch up using the Streamlined Procedure program, they won’t face any IRS or FinCEN penalties. However if the IRS later finds evidence of past willful avoidance, they can still be penalized.

The Delinquent FBAR Submission Procedures

Any American with over $10,000 in total in foreign financial accounts, including bank, pension, and investment accounts, and accounts such as business accounts that they may have signatory authority over even if not registered in their name, at any time during a year, has to file an FBAR (Foreign Bank Account Report).

The Delinquent FBAR Submission Procedures lets expats who are behind with their FBAR filing but up to date with their US tax filing catch up without facing penalties.

The Information Return Submission Procedures

Expats who have to file one or more amended tax returns late may be able to do so under the Delinquent International Information Return Submission Procedures, so long as they have a reasonable cause for needing to file late.

There are several criteria to qualify for the program, including having a net worth of less than $2 million, a theoretical US tax liability of less than $25,000 per year for the last 5 years, and that their previous failure to file wasn’t due to willful evasion of their responsibilities.

Summary

There are several ways for expats to catch up, often without facing back taxes or fines, and choosing the right way is critical.

We strongly recommend that expats who are behind with their US tax filing seek assistance from a US expat tax specialist to ensure they catch up in the most appropriate and beneficial way possible.

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