Unfortunately, it is all too common that U.S. taxpayers residing abroad have wrongfully ceased filing their annual tax reports when they relocated, or they misreported due to the complexities of international taxes. It is even more common that U.S. taxpayers born abroad are not even aware of their U.S. tax filing obligations. As a result of this, the United States government has addressed this issue, and has rolled out two (2) voluntary disclosure programs which allow its taxpayers to become tax compliant again. The first program, the Offshore Streamlined Program, is very generous and waives all penalties related to unfiled taxes and informational reports. The second program, the Offshore Voluntary Disclosure Program, is not as lenient and it assesses a 27.5% or 50% tax penalty on the aggregate highest balance of the foreign accounts which were formerly undisclosed.
The Offshore Streamlined Program is available to U.S. citizens/residents, or estates of U.S. citizens or lawful permanent residents, who meet the applicable non-residency requirement. This refers to individuals who did not have a U.S. abode and they were physically outside the United States for at least 330 full days in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed. Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States, nor maintenance of a dwelling in the United States by an individual, necessarily mean that the individual’s abode is in the United States. The Streamlined Program should be utilized by taxpayers not risking criminal prosecution.
For U.S. taxpayers who are eligible to use the Streamlined Foreign Offshore Procedures, these are the requirements: (1) For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, delinquent or amended tax returns must be filed, together with all required information returns (e.g., Forms 3520, 5471, and 8938);
(2) For each of the most recent 6 years for which the FBAR due date has passed, any delinquent FBARs must be filed. The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.
It is important to note that a taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures, and who complies with all of the instructions outlined above, will not be subject to penalties including failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
For taxpayers risking criminal prosecution, the Offshore Voluntary Disclosure Program should be utilized. This requires taxpayers to file 8 years of tax returns and FBAR reports.
XPAT 1040 specializes in international tax compliance for U.S. taxpayers who are required to back file a tax return.
Contact Us Today!