IRS Simplifies Entering the New Streamlined Filing Program
We get new clients every week who have been living outside the US and are not filing their U.S. Income Tax Returns as required. Up until the Fall of 2012 we did not have much good news to tell these people. But in the Fall of 2012 the IRS announced “Streamlined Filing Compliance Procedures.” The Streamlined Filing is a great improvement over prior programs. Essentially, if you are a nonresident of the U.S., and meet a few other criteria, you can file the 3 most recent past years of tax returns and the 6 most recent past years of Foreign Bank Account Reports (FBARs), at which point you are considered “in compliance” and up-to-date with the IRS, and they will not audit you or assess penalties on all prior years in which you may not have filed tax returns. It’s really quite a great deal!
In 2014 the IRS has liberalized those rules even further, and created two new forms to help the process (14653 for taxpayers outside the US and 14654 for taxpayers residing in the US).
The modified Streamlined Filing Compliance Procedures are designed only for individual taxpayers and estates of individual taxpayers. Note that people residing in the US and not complying with the foreign bank account disclosure regulations used to have a difficult time coming into compliance. This Streamlined Process is a huge improvement for those people living inside the US. But because most of our clients are expats, the rest of this article will focus on taxpayers that reside outside the US.
The main point that this procedure especially emphasizes is that taxpayers using the Streamlined Program must certify that their failure to file was due to non-willful conduct.
What does the procedure require? You must:
- Submit US Tax Returns (original or amended) for each of the most recent 3 years. The returns must include all of the required disclosure returns for foreign corporations, partnerships, trusts, pensions etc. (if any apply to you).
o For residents of Canada that have RRSP plans, a Form 8891 must be submitted.
- Complete the new 14653 form.
- Complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S. certifying (1) that you are eligible for the Streamlined Foreign Offshore Procedures; (2) that all required Foreign Bank Account Reports (FBARs) have now been filed (see below); and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.
- Pay all tax due as shown on the tax returns, and all required interest on each of the late payment amounts.
- If you or a spouse or dependent are not eligible to have a Social Security Number and do not already have an ITIN (Individual Tax Identification Number), submit an application for an ITIN along with the required tax returns and information returns. We are an authorized IRS ITIN Acceptance Agent and can help with this process.
- For each of the most recent 6 years for which the Foreign Bank Account Report (FBAR) due date has passed, file delinquent FBARs according to the FBAR instructions, and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures. These delinquent FBARs must be filed electronically at FinCen.
If all of this seems quite daunting, please don’t worry – we can help you through it. We have assisted dozens of non-compliant taxpayers using the Streamlined Procedures. We strongly recommend that if you are non-compliant, or know of an individual that is non-compliant, to contact us immediately. These Streamlined Procedures are not expected to be in place indefinitely.
With the implementation of FATCA, foreign banks and governments will be required to report US citizens who hold foreign accounts to the IRS. If you are not compliant with US Tax requirements, we anticipate that the IRS will begin auditing, and once you have received a notice from the IRS, you are no longer eligible for this Streamlined option. Do not wait.
We have a great deal of experience in filing tax returns and FBARs for U.S. citizens living in a foreign location. Just give us a call and we can get you started. It is a great relief to many of our expat clients to have this taken care of.
The best way for us to quickly get the information we will need, as well as for you to communicate your situation to us, would be by telephone or Skype. That way we can expeditiously let you know what information we would need, and you can fill us in on your specific circumstances. Once you have a conversation with Brad or Brett, we will know better what further information we may need, and we can then set you up with our secure client portal to exchange documents.
We look forward to hearing from you!
Williams & Parsons, PC, CPAs
708 Superior Street
Sandpoint, Idaho 83864
Tel. (208) 265-5959
Fax (208) 265-9415