If you’re an American living abroad who is filing US taxes late, meet your favorite IRS amnesty program: the Streamlined Filing Procedures. These procedures help US expats get caught up on 3+ years of taxes without paying penalties! Learn about the steps to prepare for the Streamlined Filing Procedures.
Introduction to Streamlined Filing Procedures
The IRS created this amnesty program to incentivize taxpayers to become tax compliant voluntarily, and so far, it has been a giant success! In fact, it has helped over 65,000 US taxpayers become compliant. For Americans living abroad, being late on their taxes is common because many US expats were unaware that they had a filing obligation in the first place. Fun fact: the US and Eritrea are the only two countries that participate in a citizenship-based taxation system rather than a residency-based taxation system.
Not only is it common for expats to be behind on taxes, but it is especially hazardous for them to be noncompliant because depending on the amount owed, their passport application can be denied or their current passport can be revoked. Expats rely on their passports, so while this can seem distressing, not to worry! An experienced tax professional can help guide you through this delicate process.
How to Tell if You Qualify for the Streamlined Filing Procedures
The Streamlined Filing Procedures were created by the IRS to help taxpayers who are significantly behind on their filing obligation. If you’re less than three years behind, just file your taxes as soon as possible! If you’re three or more years behind, continue reading. To qualify for the Streamlined Filing Procedures, you must be unaware of your tax filing obligation, or “non-wilful”. If you are aware of the filing obligation and did not file, then you are not eligible for the Streamlined Filing Procedures.
Ready to take advantage of this handy program? Great, we’ve outlined the steps you can take in order to prepare so you’ll know exactly what to expect before you get started.
Steps to Prepare for the Streamlined Filing Procedures
Step 1: Know What You Need to File
To use the Streamlined Filing Procedures, you’ll need to file the following forms:
- The last three years of delinquent Federal Tax Returns
- The last six delinquent years of FBAR
- Form 14653
Step 2: Start Gathering These Documents
You may need the following documents if you plan to file using the Streamlined Filing Procedures. So, now is a great time to start unearthing them!
- Copy of resident country tax returns for the years in question
- Record of wages, compensation, and tips, and taxes paid to your resident country (your payslips from January to December of the tax year)
- Record of business income and expenses for those who are self-employed (likely a business P&L, Balance Sheet and Cashflow statement)
- Record of interest and/or dividends (likely a Form 1099 from a US financial institution or interest statement from your local bank)
- Record of purchase and sale of stock and/or other securities (your broker should send you a statement)
- Record of sales and purchases of real estate and/or any property (if you purchased or sold a home in the past three tax years)
- Record of mortgage interest (if you have a mortgage on a foreign property, you’ll receive a statement with how much interest you pay annually)
- Record of distribution from pensions, annuities, profit sharing, an IRA or other retirement accounts (if you’ve withdrawn any money from any of these accounts, your employer or broker should have sent you a statement)
- Record of any Social Security benefits paid to you
- Record of any additional income (i.e., rental income, interest from bonds or savings accounts, etc.)
- Any other records you think may be applicable
Bonus: if you work with Greenback, we’ll securely store your documents for free for six years, which happens to be the period open to IRS audit.
Step 3: Complete Form 14653
Form 14653 is also known as Certification by US Person Residing Outside of the US. Basically, Form 14653 is a short explanation of why your taxes are delinquent. This certifies that you are eligible for the program, that all FBAR forms have been filed, and that your failure to file resulted from non-willful conduct. Our accountants will help you finalize this form before submission.
Step 4: Understand FBAR
FBAR (Foreign Bank Account Reporting) isn’t technically a tax-filing requirement since FBARs are required by FinCEN (Financial Crimes Enforcement Network), which is a bureau of the Treasury Department. The aggregate value of your accounts outside the United States must exceed $10,000 during the tax year being reported in order to trigger the filing requirement. So, that means if you have three accounts with $4,000 each in them, you must file. Even if you have two accounts with $5,001, you must file.
Step 5: Know What Else to Expect
When you use the Streamlined Filing Procedures, you’ll need to remit any taxes owed along with your tax returns. Plus, at the top of each page, you’ll need to write “Streamlined Foreign Offshore,” in red ink to indicate the program you are using.
Want Greenback to Do the Heavy Lifting?
We offer a special Streamlined Filing package to save you money at a flat-rate of $1450. Let’s get started! Greenback accountants can help clear your mind of this worry and make the process hassle-free. Our accountants are Streamlined Filing experts and have helped 8750+ expats around the world get compliant and stay compliant.