The Irs Streamlined Procedure For Us Expats

For US citizens and Green Card holders, when you move to a foreign country, you still need to file US tax returns each year.

For those individuals who did not know that they need to file, or are behind with filing, the IRS has an amnesty to get you compliant – the streamlined filing procedure.

Streamlined filing compliance procedures

The criteria to file for taxpayers residing outside the United States is that you have at least one year from the last 3 years where you spent less than 35 days in the US.

You will also need to show that you had non-willful conduct when you were not filing your US taxes.

The IRS accepts the following as non-willful conduct:

• You moved abroad and didn’t realize that you needed to file US taxes while you lived overseas
• You were born outside the US to American parents and had citizenship through them – you didn’t realize that meant you still had to file
• You were advised by an accountant or tax adviser in the US before you left that you could stop filing once you left and you relied on that advice
• You knew that you needed to file but you had life events that prevented you from filing

Many US expats find out they need to file by speaking to their friends and work colleagues, or by reading online articles.

A recent development is that foreign banks are required to make reports on all account holders who are US citizens. Before they do this, the bank will write to you to confirm you are a US citizen and ask if you are up to date with your taxes – this letter triggers many people to start the US filing.

Streamlined foreign offshore procedures

You will need to file the last three overdue US tax returns as the first part of the streamlined program. You report all income, pay, property income, investment income and other worldwide income to the US.

For foreign income, you can use the foreign tax credit and foreign earned income exclusion to stop US tax – but you do need to file the US tax return to claim these allowances.

Foreign bank account reporting (FBAR)

You are also required to file 6 years of FBARs – this is a report of all your foreign accounts, investment accounts and pensions.

Normally for delinquent FBARs there are FBAR penalties, but using the streamlined filing procedure there are no penalties.

Disclosure document and next steps

Along with the 3 tax returns and 6 FBARs, you will also file form 14653.

This is a 3 page disclosure explaining the failure to file and failure to pay taxes – although there should be no tax and penalty if all your income is from outside the US.

You need to explain that you understand you now need to file US tax returns and will continue to do so.

You will prepare all the documents and send the 3 tax returns and the disclosure document to the IRS in Texas – they have an office that purely deals with the streamlined filing procedure.

The 6 FBARs will be filed online with the US Treasury.

Once all that is done you will be up to date with your US taxes and you will have a clean slate with the IRS!

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