Frequently Asked Questions
Filing your US Expat Taxes Late
Are you an American living abroad filing late taxes? It can be daunting to navigate the tax filing process, so let Greenback answer all of your questions.
- Do I need to file any additional forms such as the Foreign Bank Account Reporting (FBAR)?
- I neglected to report my worldwide income on previous expatriate tax returns. What can I do?
- I have not heard from the IRS; should I bother filing an expatriate tax return?
- How does the “Streamlined Procedures” work?
- I have not filed my US tax return in years; where do I start?
- How many years of late US tax returns do I need to file?
- What documents do I need to have on hand to file my expat tax return?
- What are the penalties for filing late expat tax returns?
- Is e-filing available for late expatriate tax return filers?
- What is the Offshore Voluntary Disclosure Program? When does it end?
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]
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]
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 to those people who come forward voluntarily (and punish 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]
How does the “Streamlined Procedures” work?
Beginning September 1, 2012, the IRS announced a new initiative specifically for American expats who are behind on their required tax filings. This new 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 help with 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![back to top]
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. Note that 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 many years of late US tax returns do I need to file?
Calculating how many years of US expat taxes you need to file depends 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, such as a loan application, 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]
What documents do I need to have on hand to file my expat tax return?
Generally speaking, the most useful documents to have available are US tax returns from previous years and expat tax returns for your host country. If you are a late filer and do not have any US tax returns available, we can work around that. You will need statements of income, capital gains, interest earned, mortgage interest paid or student loan interest paid, your housing expenses, dependents, etc. If you have a local tax return, that is usually a great place to start. For more information, please refer to our article on what documents you need to file an overseas tax return.[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, this is the very best way to do so. Apply for the Streamlined Procedures and follow the IRS program requirements carefully. While, previously, many Americans chose to do a quiet disclosure (and simply file back returns and hope 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.
Note that 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 is in place, which allows the government to seize your passport if you owe $50,000 or more in back taxes. This means it’s more important than ever to keep accurate records and stay on top of your expat taxes, in order to prevent a situation like this from occurring.[back to top]
Is e-filing available for late expatriate tax return filers?
E-filing is available if you are filing 2014 and 2015 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.[back to top]
What is the Offshore Voluntary Disclosure Program? When does it end?
The current Offshore Voluntary Disclosure Program (“OVDP”) does not have a scheduled end date. This program was started in 2012, and the IRS has announced that it can close the program at any time. The IRS also launched a new set of programs, specifically designed for the unintentionally behind, known as the Streamlined Filing Compliance Procedures. While the OVDP is geared towards protecting individuals who have been intentionally avoiding taxes by hiding money overseas from criminal prosecution, the Streamlined Filing Compliance 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]