Streamlined Offshore Tax Filing Compliance Guide

If you live abroad and were unaware of your American tax liability until now, the streamlined offshore tax filing compliance procedures provided by the IRS might allow you to avoid penalties.

The IRS has an amnesty program that allows expatriates who have failed to file their taxes to report their income to the IRS without incurring additional penalties. Only taxpayers who did not file their taxes because of negligence or a mistake can use streamlined offshore tax filing compliance procedures. To use these procedures, you will have to file a delinquent return. You must also submit IRS Form 14653, certifying that your failure to file your international return was out of non-willful conduct. File your delinquent return as you normally would a tax return and include forms for additional information returns and tax credits.

To get assistance from our tax CPAs for American expatriates, call US Tax Help now at (541) 362-9127.

What Are Streamlined Offshore Tax Filing Compliance Procedures?

Sometimes, expats and other individuals are unaware of their tax filing or reporting liabilities to the IRS, causing them not to file the proper forms on time. While normally, this would result in fines and other penalties, the IRS recognizes that non-compliance is not always willful and so offers streamlined offshore tax filing compliance procedures.

Also known as the streamlined foreign offshore procedures, this process allows non-resident citizens, or expats, to file the necessary information with the IRS past the due date. This can allow you to remain in compliance with filing requirements despite not having filed the proper information by the original deadline.

The IRS gives automatic two-month filing extensions to expats, allowing them to submit their tax returns in mid-June instead of by the normal mid-April filing deadline. Because of this, you might not have to use streamlined offshore tax filing compliance procedures if you realize your tax liability soon after Tax Day passes. Not all expats can benefit from this amnesty program from the IRS, which is why you should not rely on it. If you know you have a tax liability as an expat and do not file your taxes, such actions will be considered willful non-compliance.

The IRS can make changes to its various amnesty programs, including the streamlined offshore tax filing compliance procedures. If you used these procedures in the past, do not assume that they still work in the same way. And, do not anticipate that the IRS will not make changes to or possible eliminate this amnesty program in the future.

Who is Eligible to Use Streamlined Offshore Tax Filing Compliance Procedures?

Only certain individuals are eligible to benefit from streamlined offshore tax filing compliance procedures. If you are not eligible, you might be penalized for non-compliance by the IRS.

When using streamlined offshore tax filing compliance procedures, individual taxpayers must certify that they were not willfully non-compliant in initially failing to file their taxes with the IRS. Non-willful non-compliance is the result of negligence or a mistake, not a decision to ignore tax reporting liabilities.

If any of your previous tax returns are under civil examination by the IRS, you cannot use streamlined offshore tax filing compliance procedures. The same can be said for taxpayers who are under criminal investigation by the IRS.

If you have delinquent returns or delinquent amended returns, you cannot use streamlined offshore tax compliance procedures until you pay the penalty assessments applied in your situation. Once penalties are paid, you may be eligible to use streamlined filing procedures.

Finally, in order to use streamlined offshore tax filing compliance procedures, you will need a valid taxpayer identification number. This will be your Social Security Number if you are an American expatriate.

Provided that you were not willfully non-compliant in your failure to file your taxes and have no additional issues with the IRS, you should be eligible to use streamlined offshore tax filing compliance procedures as an expat. To do so, you must also meet the non-residency requirements of the IRS. If you are a citizen living in the U.S., you will have to use separate streamlined tax filing compliance procedures.

How to Use Streamlined Offshore Tax Filing Compliance Procedures

Expats must follow specific instructions for streamlined offshore tax filing compliance procedures. Our tax CPAs for American expatriates can ensure that you send the necessary information to the IRS so that you are not penalized for non-compliance.

You can use streamlined offshore tax filing compliance procedures for any unfiled return within the most recent three years. We will start by completing a delinquent tax return using IRS Form 1040. Alongside this delinquent return, we will include the necessary information returns. The most prominent information return for expats is IRS Form 8938, Statement of Specified Foreign Financial Assets. We will note within your delinquent return that they are being filed under streamlined foreign offshore procedures so that the IRS properly processes it.

Then, you must complete IRS Form 14653, certifying that you were not willfully non-compliant in initially failing to file your tax return. If you have to file a Report of Foreign Bank and Financial Accounts with the Financial Crimes Enforcement Network, you should attach a copy of Form 14653 there as well. You must also submit all payment of taxes due at this time, including the statutory interest that is applied to late payment of taxes.

Within your delinquent return, our tax accountants will include IRS Forms 1116 and 2555, which are for the foreign tax credit and foreign earned income exclusion, respectively. These tax benefits for expatriates will allow you to lower your tax liability and exclude a large portion of your income from taxation by the IRS. Using the streamlined offshore tax filing compliance procedures does not exclude you from being eligible for these benefits.