Delinquent Filings And Tax Payments: What US Citizens Need To Know

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Living abroad and haven’t filed or paid US Taxes in years? Streamlined Foreign Offshore Procedures could give you a break.

Are you:

  1. a US citizen or “green card” holder
  2. living outside the US
  3. did not know you had to file US tax returns, file FBARs and pay US taxes while living abroad?

Risks of Non-Compliance

The risks of non-compliance and the likelihood of detection have never been greater. Following Congress’ passing of FATCA, the IRS has tools and information to detect non-compliance it never had before. In a nutshell, under FATCA, cooperating countries and their banks share your information with the IRS. All the IRS needs to do is to cross-reference you by social security number or other tax ID to detect if you are non-compliant with your US tax obligations.

What now? Should you expect to pay hefty penalties and interests? What does non-compliance mean to you and your family if you return to the US? Will the IRS find out?

Streamlined Foreign Offshore Procedures

Thankfully, the IRS has an amnesty program that may benefit you if your non-compliance is non-willful. And, best of all, you can avoid penalties altogether!

Eligibility

To be eligible for Streamlined Foreign Offshore Procedures:

  1. You must have failed to file your US tax return, pay US taxes and/or file information filings (such as FBAR)
  2. Your failure was non-willful
    • “Willful” is a complicated determination based on your facts and circumstances

Note: If you cannot meet the “non-willful” standard, please DO NOT ignore the problem. There may be other resolution avenues available to you. The problem will not get smaller by ignoring it. Please contact us for more information.

  1. You must be living abroad (i.e., be a non-US resident) at the time you file for Streamlined Foreign Offshore Procedures

Note: For those that have returned to the US but otherwise qualify for Streamlined Procedures, there is a companion Streamlined Domestic Offshore Procedures. Please contact us for more information.

What will you have to do?

  • File Federal tax returns for the last 3 years for which the filing deadline (including extensions) has passed
  • Pay any tax due for those 3 years and any interest on late payments
  • File FBARs for the last 6 years
  • File, under penalty of perjury, a Form 14653: Statement of Facts for Non-Willful Certification
    • You need to provide specific reasons for your failure to comply with your tax obligations and certify, under penalty of perjury, that your failure was non-willful

In addition, you need to file and pay US taxes for the current year and subsequent ones. Finally, don’t forget to file and pay State taxes (if applicable).

What Benefits Does Streamlined Foreign Offshore Procedures Offer?

If you are eligible and you apply correctly, Streamlined Foreign Offshore Procedures gets you back into US tax compliance WITHOUT PENALTIES.

By comparison, without Streamlined Foreign Offshore Procedures, the IRS has unlimited time to impose penalties of at least 25% (and likely much more). You also avoid the legal cost and stress of an audit or (worse) a criminal investigation.

You Should NOT Wait to Act!

  • You must act promptly to get back in compliance once you learn of your US tax obligations to be eligible for Streamlined Foreign Offshore Procedures
    • If you procrastinate or the IRS starts a civil examination before you file under Streamlined Procedures, you are no longer eligible
    • That means that you may face significant penalties, interest and other costs to resolve your non-compliance
  • Today more than ever, the IRS has tools and information to detect non-compliance
    • Following FATCA (your foreign bank is sharing information about you with the IRS), it has never been more likely that you will get a letter from the IRS
    • At that point, you may be looking at significant penalties, interest and other costs to get back in compliance
  • The IRS can end Streamlined Procedures at any time
    • No one knows when the IRS will end Streamlined Procedures, but it can at any time
    • How will you feel if you missed your opportunity to avoid significant penalties, interest and other costs?

Help!

Streamlined Foreign Offshore Procedures can really help, but you have to follow them correctly. Claiming eligibility when you are not, filing an incorrect or false certification (remember, it is under penalty of perjury) or not following the procedures correctly or completely can land you in hot water. We recommend you contact us for help.

I hope you found this helpful. For more information on this and other topics:

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Cover Art: Pixabay

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Stephanie LaGatta was born in Lima, Peru and grew up in different places, between the U.S., Peru, and Argentina. She graduated from the University of Central Florida with a Bachelor’s of Science in Accounting and later she pursued her Master’s of Science in Accounting with an emphasis in Taxation. After moving back to her hometown, she decided to pursue a career in what she knew best and serve the American Community in doing so. So, she started LaGatta And Company Tax Advisors, where she and her partners provide many types of Tax counsel for U.S. citizens.