The Streamlined Procedure for US Expats
December 1, 2022 | The Streamlined Procedure | 7 minute read
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Catch up on US Taxes Using the Streamlined Procedure
Do you need to catch up on your tax returns? The Streamlined Procedure for US expats and Americans abroad. It can help you get fully tax-compliant. It starts with processing a backlog of unfiled tax returns – without the penalties.
Think of this program as a type of forgiveness from the IRS. Especially if you completely forgot or didn’t know you had to report your worldwide income every year.
This post will help you learn about the Streamlined Procedure and how you, as an American taxpayer, can get back on track without getting in trouble.
What is the Streamlined Procedure?
On September 1st, 2012, the IRS first offered the Streamlined Filing Compliance Procedures – also known as the streamlined procedure. Essentially, they were created to help American taxpayers who are at low-risk violations to become fully compliant without penalties. Walking this program will be less cumbersome because you only need to file a certain number of forms to catch up on taxes.
Additionally, the penalty-free program for US taxpayers, certifies that the taxpayer’s failure to report foreign financial assets and pay US taxes was not a result of willful conduct. Meaning, the person deliberately avoided reporting and paying their taxes, even though they knew it was required.
Therefore, to qualify for the IRS’s streamlined procedures, your actions need to be innocent. We’ll explain later below what exactly “innocent” means from the IRS.
Initially, the Streamlined Foreign Compliance Procedures were stricter and more limited to expats, where many expats could not qualify. Fortunately, the IRS removed their restrictions in 2014, allowing a broader expat audience to be included and helping them get back on track.
As we’ve mentioned in our expat tax guide, using the penalty-free Streamlined Procedure is a legal and safe way to fix up your past tax filing neglect as an American expat. Even if you have tax debt or haven’t filed in ten years or more, the Streamlined program always allows you to catch up.
Qualifying for Streamlining
The streamlined procedures are available for US taxpayers residing in the United States and abroad. However, since our customers are primarily non-US residents (e.g., American expats), we will focus on eligibility for the Streamlined Foreign Offshore Procedures. The Streamlined Domestic Offshore Procedures are only for US taxpayers living in the States.
Eligibility for US expats to use the Streamlined Procedure:
Valid Social Security or Taxpayer Number: To participate in the Streamlined Procedures, individuals need to have a Social Security Number or Taxpayer Identification Number (ITIN). However, suppose you are not qualified to get a Social Security Number and do not have an ITIN. In that case, you can apply for an ITIN with your tax documents when filing under the Streamlined program.
Non-Willful Conduct and Good Faith Misunderstanding: This means the failure to report/pay tax from worldwide income and submit all required forms were non-willful conduct and good faith misunderstanding. Examples of non-willful conduct can be making a mistake, forgetting, or not remembering to file and/or pay US taxes. For “good-faith misunderstanding,” this is innocently not knowing or forgetting about your tax duty and wanting to make up for it.
Home Abode: You cannot have lived in a home within the United States for three years. Plus, you need to live outside the US for at least 330 days for one of the three years.
Filing Delinquent and Amended Returns: To use the Streamlined Procedure, you usually need not have filed a US federal tax return in the last three years. However, if you need to use the program to file any amended or delinquent returns, it is still possible. However, any penalty assessments previously made concerning those filings will not be abated. An amended return is when you make mistakes on a tax return and submit corrections to the IRS. A delinquent return is when you were supposed to pay the IRS taxes and failed to do so by not filing a return.
Who Cannot be Eligible to Use the Streamlined Procedure for US Expats?
If your tax returns are currently under civil examination by the IRS from any taxable year, you cannot qualify for the Streamlined Procedure. However, you can consult with your assigned IRS agent to discuss the possibility of revoking this situation.
Additionally, individuals under criminal investigation by the IRS Criminal Investigation also cannot use the program.
As an American taxpayer abroad, if you have filed delinquent or amended tax returns, you are only eligible for the Streamlined Procedure if you paid for your previous penalties. Meaning, you addressed your reporting obligations and disclosed your foreign financial assets with the IRS and are or have been in the process of paying back taxes owed.
Once you are, in fact, qualified for Streamlining, you never have to worry about paying late taxes or filing fees again. Generally, you could say goodbye to potential tax penalties of $10,000 or more!
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 you 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.
However, remember that the failure-to-pay penalty will continue to accumulate until the tax is paid in full. Our software can show you exactly how much tax you owe and how to spend it correctly with the IRS. From this, we suggest you pay your owed taxes before requesting penalty relief through the abatement program.
Do you qualify for the above penalty relief? Then you can call the toll-free number on your IRS notice and clear the issue. If your penalty relief request wasn’t granted for some reason, you could appeal on the IRS’s website.
What You Need to Get Started on the Streamlined Procedure
Getting started to catch up on US expat taxes doesn’t have to be so hard. The most important tax forms you need for the Streamlined Procedure are going to be the following:
- Most recent three years of back tax returns (not including this year’s return). If incorrect tax returns have been filed previously, you can include amended returns here.
- Most recent six years of FBAR (Foreign Bank Account Report) reports. Yet this does not include this year’s report. FBARs are only required if you have had over $10,000 from all your non-US/foreign financial accounts at any time during the year. If you decide to file the Streamlined Procedure, you will need to file FBARs regardless of whether you met the threshold.
- Signed statement on the Certification by a US Person Residing Outside of the US (Form 14653). When you sign it, you are stating you are eligible for the program, your FBAR forms are filed, and your failure-to-file tax returns was due to non-willful conduct.
Every single one of these forms can be found in our expat tax software. Just sign up today to get started!
The Streamlining Process and IRS Audits
Our software is intuitive, allowing you to make up three years of tax returns and six years of FBARs in as little as one hour. Once you complete your Streamlined Offshore Procedure forms, the IRS will process them like any other tax return.
Additionally, the IRS wants to inform that “the IRS will not acknowledge receipt of the returns, and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS.”
Auditing from Streamlined Procedure
After submitting your Streamlined forms, the IRS will not subject you to any audit automatically. However, you still will be within the system that can trigger any auditing if need be. Auditing is only necessary to check information against what you reported on your tax returns, FBARs, and other financial sources.
Therefore, like any other tax return, you may be subject to appropriate IRS examination or civil penalties by submitting your work under the Streamlined Program.
By completing your Streamlined Procedure package, the IRS expects you to continue complying with US law for all future file returns and reporting your worldwide income every year before the tax deadlines.
Streamlined Procedure Cost
Streamlined Procedure packages amongst US expat tax companies vary within the thousands. However, we at MyExpatTaxes understand that you shouldn’t have to pay so much to get expat tax filing done.
Our Streamlining package is only 749€ 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 149€ per return
- Six years of FBAR reports
- Personal, human tax support that will answer all your questions
Note: The 749€ fixed rate is only for individual filing. The Passive Foreign Investment Company (PFIC) or Form 8621 is not included and is typically unnecessary. Foreign Trusts or Form 3520/A is also not included and typically not required. Then, for corporate filing, the Streamlined starts at 1,195 euros since you will need to meet with a foreign corporate tax specialist first to determine which corporate forms are required. You can see more on our pricing page.
Why Streamlining is best with MyExpatTaxes
Not only is MyExpatTaxes one of the most trusted expat tax companies out there, but our Streamlined Program for US Expats is pretty unbeatable.
With MyExpatTaxes, becoming US tax compliant is fast and affordable. We offer one-third the price of a tax consultant, and you can become tax compliant in a matter of hours.
Take it from Emily, one of the American citizens living abroad in France. She filed our Streamlined Procedure this year and shared her story on social media:
“It’s embarrassing to admit that I didn’t declare my taxes for several years, but after failing to file expat taxes one year, the next few kept piling on. My mental excuses of “I’ll get to it at some point” or “I can always catch up on them later” were just methods of avoidance, a sneaky tactic one’s brain uses when one’s anxiety starts to spike.
At first, I was even nervous to go through the streamlining procedure, despite the fact that all my income since 2015 has been in France, but their software made it easy. Every question was straightforward, and next to certain topics that might have been confusing, they included little explanations of the choices you could make. Financial stuff has never been my strong suit, but MyExpatTaxes makes it virtually idiot-proof!”Emily, the Glittering Unknown.
Get Started with US Expat Streamlining
Are you ready to get tax compliant via the Streamlined Procedure as a US Expat or American Abroad? Our expert expat Enrolled Agents and CPAs are available and prepared to help. Catch up stress-free with our premium package with our award-winning software.
Let’s help you get back on track with your expat taxes. You deserve peace of mind.