Many American expats believe they leave U.S. tax laws behind when they head overseas to work. Unfortunately this is not true. Coming to the realization they are not compliant with U.S. tax laws can produce stress, according to Trey Atkins of Global.cpa. But expats who have been delinquent on their taxes for more than three years may be eligible for a special amnesty program from the IRS known as Streamlined Filing Compliance Procedures (SFCP).
What is SFCP?
U.S. expats are generally required to file U.S. Form 1040 and pay any federal income tax due if they receive income in excess of $12,400 ($12,550 in 2021). If an expat failed to file required returns and the failure was not ‘willful’ (see below) there are several tax amnesty programs that may be available to her under one of several the SFCP programs offered by the IRS. These procedures offer a safe, efficient (and legal) method to catch up back-tax compliance.
US expats who have failed to file taxes face significant “compliance anxiety” notes Trey Atkins, CPA founder of Global CPA. “But the relief available under the IRS SFCP programs offer exceptional opportunities for expats to get right with Uncle Sam while significantly reducing their exposure to non-filing penalties for their innocent mistakes.”
The key to taking advantage of the SFCP procedures is that your failure to file was not ‘willful’. You may have heard conflicting information about your filing responsibilities while working overseas. There is no shortage of confusion regarding the matter for inexperienced or first time expats. Confused? Unsure? Then you were very likely not being willful in your disregard of tax law.
In addition to the non-filing mistake having been an honest one U.S. expats must meet all of the following criteria to participate in SFCP programs:
Residents outside of the United States for at least 330 days.
No permanent residence in the United States for the last three years.
No U.S. tax return filed for the last three years.
Penalties on any previously filed returns which were delinquent will not be abated.
Must possess a U.S. Individual Taxpayer Identification Number (ITIN or SSN)
Must sign IRS Form 14653 or 14654 – ‘non-willful’ statement.
Taxpayers meeting these requirements can avoid significant failure to pay and failure to file penalties. Interest on tax due, and the tax itself is not subject to any amnesty or forgiveness. However, the penalties forgiven can amount to many thousands of dollars.
The streamlined procedure is available only to individuals and requires taxpayers to file: at least three years of back taxes (not including your current year return); up to six years of FBAR reports for those years required (generally when you have more than $10,000 in foreign accounts during the year); and, a signed statement regarding your lack of willful intent in non-filing. A qualified tax professional can make sure your Form 1465X statement is properly constituted and your declarations properly stated.
Global.cpa principals Mark Lee and Trey Atkins have been CPAs for over thirty years and lived and worked outside the U.S. for decades. Global.cpa provides you the support and expertise you need to get you back in the system. To learn more, including if you qualify for relief under the IRS Streamlined Filing Compliance Procedure programs, visit https://www.global.cpa/.
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