The Streamlined Filing Compliance Procedure for American Citizens Abroad
Taxes. Many people loathe them, and few like them. But whether you’re a fan of taxes or not, it’s a legal requirement to fulfill your obligations wherever you are resident.
The United States is no different. Almost all Americans are familiar with filing domestic tax returns yearly – it’s virtually impossible to overlook. But did you know that as an expat, you still need to file an American income tax return, regardless of how long you’ve been living abroad?
Life moves fast, especially when living in a new country. Getting caught up in a recent move, career, language, or location is easy, and staying tax compliant is essential! Luckily, a procedure is in place to help expats quickly file US income tax returns from abroad, designed to streamline the process for those considered ‘low risk’. How does this work? We have you covered with this brief but detailed overview along with some expert guidance!
So, What Are the Streamlined Filing Procedures?
Are you a US Citizen or Resident and had missed filing your prior year’s US Tax Returns? You have the option to be in compliance!
First introduced in 2012 by the Internal Revenue Service (IRS), the procedures enable expats to become tax compliant. The service was designed to encourage those with unfiled tax returns to file up-to-date returns with the understanding that their delinquent returns were not a result of willful conduct.
Initially, the program was strict. It required a risk assessment procedure and various tax thresholds. This resulted in many expats needing help to file under the ‘low risk’ category and being unable to use the procedures. However, in 2014, the IRS removed these restrictions, making the program far more accessible.
There are certain eligibility criteria you need to fulfill. Key to note is that the streamlined procedures are designed for individual taxpayers or the estates of individual taxpayers only.
- Taxpayers must certify their conduct was not willful. You will need to certify that failure to file US Income tax returns was not a conscious choice – for example, if you did not know you were required to do so.
- Not under examination by the IRS for any tax year. If the IRS has or had opened a civil or criminal examination of any of your US Income returns, you will not be eligible for the service.
- You must have a valid Taxpayer Identification Number (TIN). If you do not hold an ITIN or Social Security Number (SSN), you cannot use the streamlined procedure.
- Meet the non-residency requirement. You must not have had an abode in the United States for one or more of the most recent tax years.
- You have lived outside the United States for at least 330 days. In one or more of the most recent tax years, you must have been physically present outside the United States for at least 330 days.
- You haven’t used streamlined procedure in the past. If you had opted once to file using the streamlined filing of your US income tax returns to remain compliant, you cannot use the streamlined procedure.
What Do I Need To Prepare?
To get tax compliant, you’ll need to prepare and submit some forms to the IRS. Firstly, you’ll need to submit your US Income tax returns for the previous three years.
- In an incomplete or incorrect tax return has already been filed in one of these years, an amended tax return can be submitted using form 1040X (Amended U.S. Individual Income Tax Return).
- If no US Income tax return has been filed for any of the previous three years, you should file using Form 1040 (U.S. Individual Income Tax Return).
Note: the IRS requires you to write ‘Streamlined Foreign Offshore’ in red ink at the top of the first page of each year’s US Income tax return.
For each of the most recent six years, you must electronically file delinquent FBARS (Report of Foreign Bank and Financial Accounts). You can find instructions for filing an FBAR on the IRS website, while you can find the site for submission here. Along with the FBARS, you must include a statement explaining that they are being filed as part of the Streamlined Filing Compliance Procedures.
You must also sign a statement on the Certification by U.S. Person Residing Outside of the U.S. (Form 14653). This certifies that you are eligible for the Streamlined Filing Compliance Procedures. It also certifies that all FBARs have been filed and that your failure to file previously was non-willful conduct.
In preparing the files, you must also submit payment by check of all taxes due as reflected in your filed US Income tax returns.
Once you have prepared all documents, you must send them in paper form to the IRS address listed here.
These are the basic steps for most individuals using the Streamlined Filing Compliance Procedures. You can find more specific instructions and information regarding different circumstances on the IRS portal. You can also find more information on necessary forms and a detailed breakdown of eligibility.
Want a Helping Hand?
Filing taxes from abroad and checking your eligibility can be stressful. Luckily, help is at hand! Getting the help of an experienced tax advisor such as Blue Umbrella can save you time, stress, and money. They can check your eligibility and prepare and submit all documents on your behalf, helping you remain tax compliant and enjoy your life abroad.
Contact Blue Umbrella today for U.S. tax enquires.