If, like many expats, you’ve considered filing with the streamlined procedures on your own, you might want to read our list of reasons why you may want to reconsider. Unless, of course, you’re an accountant who specializes in expat taxes; in that case, you have our blessing.
So You’re Late Filing Expat Taxes. Don’t Worry—You’re In Good Company
In recent years, a lot of attention has been paid to foreign financial assets. Many people have discovered that they are required to file income tax returns or might not have included the necessary information on certain foreign financial accounts. As an added bonus, you also became aware of the penalties that can be charged: late-filing and late-payment. With all of this fresh in your mind, you research how to get back in compliance and, just as importantly, if there is any way around the penalties. Perhaps you came across streamlined filing procedures and thought to yourself, “this the solution to my problem!” Now, you are ready to file it yourself. Do it yourself projects are always exciting, but this one that you should reconsider.
Filing With the Streamlined Procedures
The streamlined procedures require that you have a good understanding of international and federal tax laws because you must determine what forms you need to file. For starters, if you are the owner of a foreign entity, then you must determine the tax classification, which tells you what information return is required for filing. After that is determined, you must decide which category of filer you are, since only certain foreign entities are required to file. If the required information isn’t reported, then the form is invalid, and you protect it at your own jeopardy.
If you have a foreign pension, then you must determine if you are considered the owner to determine which forms are required of you. Some countries have treaties in place that can alter the default rules on how it’s taxed and how it is reported—so, that is yet another complication. Even what might look like a simple financial account could require the complex Form 8621 or Form 3520. A missing form, the wrong form, or not enough information could all kick you out of the compliance procedure.
Even once all of the returns and information return are complete, you must determine what version of the streamlined procedures to use. This might seem simple, but it’s not. You could live outside of the US and still be considered a US resident. For those living in the country, there is a 5% miscellaneous payment potential, and failure to pay everything owed could have a negative financial impact. Even once you select the proper procedure, you must file a certification statement, which requires a detailed explanation of circumstances. A simple statement claiming to be unaware isn’t enough. The streamlined procedure steps must be followed perfectly, or other protection offers aren’t granted. The IRS will process the return using the regular procedure, and you will not be notified of this.
In conclusion, filing with the streamlined procedures on your own can increase your risk since everything needs to be filed correctly for the protection to be valid. A simple mistake or misunderstanding of the laws could result in severe penalties. Greenback is here to help and can make sure that the return is properly filed.
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