Frequently Asked Questions
Filing Your Taxes Late
Are you an American living abroad filing late taxes?
We understand that it can be stressful to be behind on your US taxes. It can be daunting to navigate the tax filing process, so we try to allay your fears by explaining complex tax matters in layman’s terms (not jargon), so you understand your choices.
The announcement of waived penalties for those getting caught up using the Streamlined Procedures program is a huge relief for millions of US expats!
Learn all about the program to see if it’s right for you.
(Update for 2020: Due to the COVID-19 pandemic, the IRS has extended the normal April 15th and June 15th deadlines. All tax filings and payments are now due July 15, 2020. However, we recommend you file as early as possible.)
- I have not filed my US tax return in years; where do I start?
- How do the Streamlined Procedures work?
- Do I need to file any additional forms such as the Foreign Bank Account Reporting (FBAR)?
- How many years of late US tax returns do I need to file?
- I have not heard from the IRS; should I bother filing an expatriate tax return?
- I neglected to report my worldwide income on previous expatriate tax returns. What can I do?
- Is e-filing available for late expatriate tax return filers?
- What are the penalties for filing late expat tax returns?
- What is the Offshore Voluntary Disclosure Program? When did it end?
- What services do you provide for filing late tax returns?
I have not filed my US tax return in years; where do I start?
This situation is more common than you might think. You should start by talking with an expat tax expert to identify how many years of back taxes you are going to need to file and what documentation you need in order to complete the necessary reports and returns to become compliant with the US tax authorities. You will need to prove expat status for each year. Be aware that you may owe penalties for filing late or failing to pay taxes on time. Generally speaking, this will only be the case if you owed money on your US taxes, which will cause interest and penalties to accrue on the underpayment. If you have not declared your foreign bank accounts, you may also need to file FBAR forms for the years you have missed. Our experience is that people who come forward have been given more leniency than people the IRS has found through their own means.[back to top]
How do the Streamlined Procedures work?
Beginning September 1, 2012, the IRS launched a new initiative specifically for American expats who are behind on their required tax filings. This program allows taxpayers to get caught up by filing only the last three years of delinquent expat tax returns, as well as 6 years of Foreign Bank Account Reporting (FBAR) forms. All forms are filed together along with a two-page questionnaire and sent together to the Department of the Treasury. Taxpayers filing their delinquent returns and forms using the Streamlined Foreign Offshore Compliance Procedures will not be subject to penalties for the late filing of the forms or late payment of tax.
Recently, the IRS announced major changes to the program and waived all penalties for those getting caught up this way. This is a huge relief for millions of expats! We can help in all aspects of this filing including the questionnaire. Our experts will ensure you have everything you need to come forward painlessly. There has never been a better time to get back on track!
If you’re in this situation, you’re going to want to take quick action. The IRS is lenient toward those who come forward voluntarily, but if they notice your non-compliance before you have taken action, they are much less sympathetic. Also, the IRS ended the Offshore Voluntary Disclosure Program on September 28, 2018, which could signal that the era of IRS leniency is coming to an end, and the Streamlined Filing Procedures may well be on their way out.[back to top]
Do I need to file any additional forms such as the Foreign Bank Account Reporting (FBAR)?
The Foreign Bank Account Reporting (FBAR), officially known as FinCen Report 114, will need to be filed electronically for any year that a taxpayer had financial interest in or signature authority over accounts that totaled more than $10,000 at any given time during a calendar year. This is an aggregate amount of all your accounts; for example, if you had $4,000 in one account and $7,000 in another, you would need to file FBAR. The US Department of the Treasury can impose significant penalties for failing to file, including the seizure of assets. If you are behind on filing FBAR, we recommend you get caught up as soon as possible.[back to top]
How many years of late US tax returns do I need to file?
The number of years of US expat taxes you need to file will depend on your situation. Typically, three to six years will be sufficient for the IRS to consider you caught up. If you are trying to sponsor a spouse for US citizenship, up to eight years may be required in order to prove your ability to support your spouse as a US citizen. If you need to get caught up to prove financial merit (for instance, if you are applying for a loan), three years is generally enough. That said, every situation is different; you should discuss your options with an expat tax expert to make sure you file the correct number of returns.[back to top]
I have not heard from the IRS; should I bother filing an expatriate tax return?
We have many clients who feel that they are under the radar when it comes to filing US expat taxes and other reports that are due to US authorities. While this may be the case, in the event you are caught by the IRS or the US Department of the Treasury (even if you are a “small fish”), the penalties could be exercised to the maximum amount, including steep financial burdens and potential jail time. Fortunately, the IRS seems to be more lenient toward those who come forward voluntarily but punish the people they catch. As a result, we strongly recommend any late filer become compliant with all US authorities as soon as possible.[back to top]
I neglected to report my worldwide income on previous expatriate tax returns. What can I do?
In the event that you have incorrectly reported information on prior years’ tax returns, you should file an amended expatriate tax return to avoid penalties from the IRS for incorrectly reporting your income. Depending on the situation, you may not end up owing any taxes after the credits and deductions applicable to expatriates have been applied to your return.[back to top]
Is e-filing available for late expatriate tax return filers?
E-filing is available if you are filing late tax returns, as long as you aren’t filing under the Streamlined Procedure. If filing Streamlined, you will need to mail paper copies of the returns to the IRS. If you’re filing under the Streamlined Procedures, learn more about the steps you should take to prepare for Streamlined Filing.[back to top]
What are the penalties for filing late expat tax returns?
Prior to September 1, 2012, the IRS assessed penalties on late tax returns no matter how they were filed. With the changes to the Streamlined Procedures, an IRS amnesty program to help taxpayers get caught up on US taxes, they waived all penalties for expats! If you are behind and need to get caught up, the very best way to do so is by applying for the Streamlined Procedures and following the IRS program requirements carefully. While previously many Americans chose to do a quiet disclosure (simply filing back returns and hoping they don’t get flagged), we highly recommend going through this program and doing things properly – especially because there are no penalties to do so.
However, FBAR penalties can still be assessed. The US Department of the Treasury reserves the right to seize up to 50% of the assets in overseas bank accounts or $100,000 per account, whichever is higher. However, this is typically only done in cases where people are deliberately hiding assets overseas to avoid taxation. Expats are generally not penalized if they voluntarily come forward.
There is a new passport revocation law in place, which allows the government to seize your passport if you owe $50,000 or more in back taxes. This means keeping accurate records and staying on top of your expat taxes is more important than ever in order to prevent a situation like this from occurring.[back to top]
What is the Offshore Voluntary Disclosure Program? When did it end?
The IRS closed the Offshore Voluntary Disclosure Program (“OVDP”) on September 28, 2018, which means this amnesty program is no longer available to expats. However, the IRS also launched a set of programs specifically designed for expats who are unintentionally behind on their taxes, known as the Streamlined Filing Procedures. While the OVDP was geared towards protecting individuals who had been intentionally avoiding taxes by hiding money overseas from criminal prosecution, the Streamlined Filing Procedures are designed for Americans who have unintentionally not been filing their taxes or reporting their foreign bank accounts. If you are behind on your taxes, you should consult with a tax expert to determine the best way to become compliant.[back to top]
What services do you provide for filing late tax returns?
If you are filing taxes 1 year late, we recommend filing as soon as possible as penalties have been accruing. If you need tax assistance, learn more about our flat-fee late tax return preparation. If you were unaware that you needed to file and require several years of tax filing, you may qualify for the Streamlined Filing Procedures. If you need tax assistance, learn more about our flat-fee Streamlined Filing Package designed to save you money.[back to top]