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!
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.
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.
What do I do if I haven’t filed foreign bank account reporting (FBAR) for several years?
The IRS has multiple options for individuals who are behind on their taxes or FBAR filings. The 2012 Offshore Voluntary Disclosure Program is still open. The Streamlined Program allows individuals who are low risk to catch up on their late taxes, and some people are doing what is informally known as a “quiet disclosure”, meaning they just file the late paperwork and hope for the best. The appropriate option will depend on your specific circumstances, but generally speaking, unless you have been actively hiding money offshore, the Streamlined Program is likely your best option. This requires you to file your last 3 years of tax returns and up to 6 FBARs.
