The final deadline for filing expat taxes was October 15th; did you miss it? If so, you’ll want to read the answers to the questions our accountants encounter from expats just like you. We’ve laid out your options, so you don’t have to lose any more sleep over your expat taxes.
1) I Have Not Filed My US Tax Return in Years. Where Do I Start?
The answer to this depends on exactly how late you are. If you’re only one year behind, you can just file immediately; and the sooner you do so, the less you’ll spend on accrued interest.
If you’re more than one year behind, filing late can seem intimidating. But the IRS offers the Streamlined Filing Procedures, which is an amnesty program that has helped expats in the same situation as you get caught up penalty free for years! To use this program, you will file the three previous years of Federal Tax Returns and six years of FBARs (Foreign Bank Account Reports) along with form Form 14653.
The only drawback to the Streamlined Filing Procedures is that they are offered on a temporary basis by the IRS; they could close at any time. In fact, this past year, the IRS terminated a different amnesty program (the Offshore Voluntary Disclosure Program for willfully noncompliant taxpayers). So if you need to use this program, your best bet is to get started right away.
2) What Is Foreign Bank Account Reporting (FBAR) and What Do I Need to File?
The Foreign Bank Account Reporting requirement was created in the 1970s as a way to discourage tax evasion. Rather than the IRS, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) manages FBAR reporting, and FBAR reports are always filed electronically.
The gist of FBAR is that if you at any point during the tax year had more than $10,000 in your foreign bank account reports, you’ll need to file. This includes all your bank accounts, in total. If you have two accounts with $5,000 in them, yes, you’ll need to file. But this is just a reporting requirement – there are no taxes assessed through the FBAR, only penalties applied if you have failed to file.
Further, there’s another reporting requirement worth noting: FATCA Form 8938. FATCA is a reporting requirement you’ll need to file with the IRS (alongside your Federal Tax Return) if you meet the reporting threshold. The thresholds for triggering a FATCA reporting requirement are much higher, but also more nebulous. For expats living abroad, single filers will need to file Form 8938 if the total value of their assets is more than $200,000 on the last day of the tax year or more than $300,000 at any point during the year. For married individuals, the thresholds double. And for both of these reporting requirements, penalties may be levied for noncompliance.
3) What Are the Penalties for Filing Late Expat Tax Returns?
Two penalties may be applied for those who are behind on their Federal Tax Returns. The failure to file penalty is 5% of unpaid taxes for each month after your filing due date up to a maximum of 25% of total unpaid taxes. The failure to pay penalty is an interest charge of 0.5% per month of total unpaid taxes and continued until it reaches 25% of your total unpaid taxes.
However, these penalties and the FBAR and FATCA penalties listed above can be avoided by using the Streamlined Filing Procedures.
4) How Do the Streamlined Filing Procedures Work?
Besides filing the three previous years of Federal Tax Returns, six prior years of FBARs, and Form 14653, you’ll need to prove your expat tax status for each year. So, gather documents that verify your travel schedule, residence, and other relevant financial information before you get started. Then, you’ll want to meet with an accountant who specializes in expat tax preparation to ensure you have submitted everything correctly and don’t overpay on your taxes.
5) Which Services Does Greenback Provide for Filing Late Tax Returns?
Greenback offers a Streamlined Package that will get you caught up in no time, anxiety-free. Our flat-fee pricing ensures that there are no surprises when you settle the bill, and our accountants do the heavy lifting to guarantee your experience is hassle-free.
Get Started Today!
Now, there’s even more reason to get caught up on your taxes: when you complete your Federal Tax Return with Greenback by December 15th, you’ll be entered to win a $1,000 Hotels.com gift card. See offer for details and get started with Greenback today.