The Streamlined Procedure for US Expats

The Streamlined Filing Compliance Procedure is a program the IRS created that allows expats to catch up on their US taxes and FBARs without the fear of penalties. This program is especially aimed at American citizens living outside the US who were unaware of their tax obligations.

Eligibility for the Streamlined Procedure

Valid Social Security or Taxpayer Number: Individuals need a Social Security number or taxpayer identification number (ITIN) to participate in the Streamlined Filing Compliance Procedures.

Non-Willful Conduct: Non-willful conduct is simply being unaware of your tax obligations.

Home Abode: You must not have lived in a home within the US for three years and must have lived outside the US for at least 330 days during one of those three years.

Filing Delinquent and Amended Returns: To use the Streamlined Procedure, you usually need to have not filed a US federal tax return in the last three years. However, it is still possible to use the program to file any amended or delinquent returns.

Who is Not Eligible for the Streamlined Procedure?

If you receive a letter by mail from the IRS stating your tax returns are under civil examination, you do not qualify for the Streamlined Filing Compliance Procedure. Consult an IRS agent to discuss the possibility of revoking the civil examination.

Additionally, individuals under criminal investigation by the IRS Criminal Investigation also cannot use the program.

Steps to Get Started with the Streamlined Procedure

Getting started to catch up on US expat taxes does not have to be difficult. The most significant tax forms you need for the Streamlined Filing Compliance Procedure are going to be the following:

1. The last three years of tax returns
2. The last six years of Foreign Bank Account Reports (FBAR)
3. Form 14653, the Certification by a US Person Residing Outside of the US

Foreign Tax Benefits

When using the Streamlined Procedure, expats can still use foreign tax benefits to ensure they owe little to no US taxes. Expats will generally use either the Foreign Earned Income Exclusion or the Foreign Tax Credit to reduce their US tax liability.

The Foreign Earned Income Exclusion (FEIE) allows US expats to exclude up to $126,500 of foreign earned income from US taxation.

The Foreign Tax Credit (FTC) approach uses income tax paid in the expat’s foreign country to offset any US tax liabilities.

Additionally, the US has multiple tax treaties with different countries to prevent double taxation on income, including pension income, Social Security benefits, and more.

Amend Mistakes on Your Streamlined Tax Return

Mistakes will always happen, but correcting US tax returns can be quite a long process. US expats can use the Streamlined Filing Compliance Procedure to correct their tax returns, but if another mistake is made, the IRS can impose penalties. Additionally, penalties will not be abated if an expat uses the Streamlined Procedure to correct past mistakes.

Submitting the Streamlined Returns

If you have an amended return, submit Form 1040X with all the necessary corrections. If you submit for the first time abroad, complete all three tax returns and six FBARs from the past years.

Once completed, you must write “Streamlined Foreign Offshore” in red ink at the top of the first page of Form 1040 and Form 14653.

For amended returns, write in red ink “Amended Streamlined Foreign Offshore” at the top of the page on Form 14653. On page two, explain the error or omissions you made in the original document.

Unfortunately, the IRS does not allow you to submit the Streamlined Procedure via e-filing. But with MyExpatTaxes, we’ll make it as easy as possible to get you set up so you know what to mail and where to mail it.

Mailing Address for Corrected Streamlined Tax Return

When paper mailing your Streamlined tax return, you will need to submit your returns via mail:

IRS

3651 S. IH 35

MS 6063 AUSC

Attn.: Streamlined Procedures

Austin, TX 78741

United States

We suggest paying a bit extra at the post office to receive a tracking number and possibly proof of signature from the receiver to ensure your documents arrive safely.

Understanding Penalties

When a US expat does not file their taxes, several different penalties can apply. The two most common are failure to file and failure to pay.

The failure to file penalty is 5% of the unpaid taxes for each month or part of a month that a tax return is late. The penalty will not exceed 25% of your unpaid taxes.

The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty will not exceed 25% of your unpaid taxes.

FBAR and FATCA Penalties

In addition to standard penalties, there are penalties for not reporting your foreign financial accounts. For an FBAR, there is a penalty for both non-willful and willful violations.

• For non-willful violations, penalties can reach $10,000 per violation
• For willful violations, penalties can be the greater of $100,000 or 50% of the account balance per violation

Even FATCA Form 8938 has additional penalties for not reporting your foreign financial assets.

• A penalty of $10,000 for failing to file Form 8938
• If the IRS issues a notice of non-compliance and the form is not filed within 90 days, additional penalties of $10,000 for every 30 days of continued non-compliance, up to a maximum of $50,000

Denied Passport

In the past, there have been cases where US citizens tried to renew their passports and were hit with a large sum of unpaid taxes. If the unpaid taxes exceed $64,000, expats could lose their passports.

If you receive an IRS Letter 6152 regarding your unpaid tax debt, call within 30 days to resolve your issue.

First Time Penalty Abatement Program

If you already received a notice from the IRS that you must make up and file US expat taxes, there is another way to gain penalty relief. The First Time Penalty Abatement Program allows US citizens abroad to file for unfiled/missed tax returns without fees.

Using this particular program is only available if the following are true:

You didn’t previously have to file a return or have no penalties for the three tax years before the tax year in which you received a penalty.

You’ve filed all currently required returns or filed an extension of time to file.

You have paid, or arranged to pay, any tax due.

The failure to pay penalty will continue to accumulate until the tax is paid in full. Our software can show you exactly how much US taxes you owe and how you should approach paying the IRS.

Streamlined Procedure Cost

Streamlined Procedure packages amongst US expat tax companies vary within the thousands. However, MyExpatTaxes doesn’t believe that US expats should be paying thousands to become tax-compliant.

Our Streamlining package is only 829$ and is the most comprehensive and affordable program for Americans living abroad. The price is broken down in the following ways:

• Four years of tax return, priced at 169$ per return
• Six years of FBAR reports
• Assigned Tax Professional to answer any tax questions

Note: The 829$ fixed rate is only for individual filings. The passive foreign investment company (Form 8621), foreign corporate (Form 5471), and foreign trusts (Form 3520/A) are a few complex forms that are not included and are typically not required unless you have more complicated foreign investments and assets.

Get Started with US Expat Streamlining

Our affordable expat tax software solution can provide you with significant stress relief when filing taxes from abroad. Choosing not to file taxes while living abroad can put you in quite a sticky situation, so don’t wait. Use the Streamlined Procedure to catch up on your US taxes!