How to Catch Up On US Taxes

expat network

How to Catch Up On US Taxes

This article was written by David McKeegan from Greenback Expat Tax Services. All information was accurate as of January, 2015.

If you are one of the many expats who doesn’t always stay up to date on the latest tax and filing obligations, you’re not alone! Fortunately, that’s where we come in. It’s our job to keep you abreast of the latest expat tax regulations. And when it comes to late filing, it pays to be ‘in the know’.
The IRS has recognized the worldwide problem of delinquent tax filers. In fact, in 2014 the US launched FATCA, the Foreign Account Tax Compliance Act, which forces individuals to report their foreign assets if they exceed certain thresholds. This was originally created to encourage tax evaders to come out of hiding, but the IRS also recognized that in order to do that, it was important to create programs under which one could file.
Streamlined Filing

The new Streamlined Filing Procedures were created to help innocent taxpayers become compliant on their US taxes. This is the program for many expats, especially those who didn’t realize they still had filing obligations.

Under the Streamlined Procedures, individuals must file three years of Federal Tax Returns and six years of FBARs (Foreign Bank Account Reports). But the best part? The IRS has waived the late filing and FBAR penalties for those whose lack of filing was non-willful—meaning, there was no intentional effort to hide money.

You cannot file under this program if you have received a delinquency letter from the IRS or are under investigation, but that applies to very few expats. There is currently no end date to this program—which means it could end at any time—so late filers are encouraged to file as soon as possible to take advantage.

Offshore Voluntary Disclosure

The IRS also marked changes to their Offshore Voluntary Disclosure Program (OVDP). This once temporary program has been extended until further notice. The OVDP is designed to allow individuals hiding money in offshore accounts to come forward, pay a (hefty) fine but avoid criminal prosecution.

Although the original intentions of the IRS’s efforts to collect unpaid taxes were good, a lot of expats have been caught in the crossfire of the new rules. Many expats had legitimate overseas savings and failed to report them to the Treasury Department simply because they didn’t know they had to.

But OVDP is not for this audience! OVDP is a better choice for those purposely hiding assets from the IRS to come forward, legitimize their foreign assets, pay reduced penalties and evade criminal prosecution.

Before applying for either program, however, we strongly suggest you contact an expat tax professional to see which fits your particular situation. Few expats will need to file under OVDP—but if you do, it is important to fully understand what you are agreeing to, as the penalties under this program are huge.

Greenback Expat Tax Services specializes in tax preparation for Americans living abroad. Our team of CPAs and IRS Enrolled Agents have decades of experience with US expat taxes. We offer transparent, flat fee pricing and a hassle-free process designed to save you time and money. To learn more about how to catch up on your US expat taxes, contact us today.

Moving Abroad Checklist

Initial Considerations

Will your partner be travelling with you?

If so, what will they be giving up in your present home and will they be able to continue with their career in your new home? You will need to check whether a separate visa is required for your partner to work or if your visa gives that right. If they are unable to work you will need to decide on the effect on your finances and what alternatives are available to give a fulfilling life (home business, training, voluntary work).

Are you taking family with you?

Moving with family raises many exciting opportunities, but also can create challenges. The HSBC Expat Explorer survey indicates that expat kids can take six months to settle in to their new country (see article). Getting young or even older children to prepare to move and leave their friends and family behind can be a challenge and should be thought through.

The options for education is another area that needs to be thought through.

Moving your child to a new country with a different education system can be a great opportunity to broaden their experience, but if they are close to key exams the timing can make this inadvisable. If you do take your family with you, it is important to decide between joining the local school system or choosing an international school.

Where will you be living?

Whether you will be living in a house or apartment, furnished or unfurnished, these decisions will affect what you need to take with you. The time you are planning to live overseas will also affect whether you should leave your property at home empty, rent it out or sell it. See the article Sell, Store or Ship.