A Step-by-Step Guide to Filing US Expat Taxes Late
This article has been written exclusively for Expat Network by Greenback Expat Tax Services
1. Determine how many years you are behind on your taxes.
If you recently moved abroad, you may have missed only one or two deadlines. If you fall into this category, filing your Federal Tax Return as soon as possible is typically the best course of action. However, some expats have been living abroad for years with no idea that their tax-filing requirements followed them to their new residence. If this is you, move on to step 2; otherwise, skip ahead to step 3.
2. If you are many years behind, choose an IRS amnesty program.
The IRS offers amnesty programs for taxpayers who are many years overdue on their tax filing. However, these programs are not offered permanently, so the IRS can close them at any time. In fact, the OVDP (Offshore Voluntary Disclosure Program) – a program that allowed delinquent taxpayers who were deliberately hiding money in offshore accounts to come forward without fear of prosecution – was terminated by the IRS, effective September 28, 2018.
Luckily, most expats who are behind on taxes aren’t behind intentionally. If you didn’t know about your tax-filing requirements, you can use the Streamlined Filing Procedures. The Streamlined Filing Procedures is another IRS amnesty program for taxpayers who were non-willfully noncompliant on their taxes. This program allows expats to get caught up penalty-free! In order to use these procedures, you would need to file three years of delinquent Federal Tax Returns, six years of FBARs (Foreign Bank Account Reports), and you also need to sign Form 14653 certifying that your lack of filing was non-willful. Using the Streamlined Filing Procedures means the failure-to-file penalties, failure-to-pay penalties, and FBAR penalties are waived.
3. Find out what other forms may be required of you in the future.
Additional reporting requirements and stipulations are applied to expats in specific financial situations. For instance, if you’re self-employed, you’ll be required to pay self-employment taxes in addition to income taxes if you earn more than $400 annually. Other forms, such as Form 2555 (the Foreign Earned Income Exclusion) and Form 1116 (the Foreign Tax Credit), can help you offset your tax liability by certain amounts, depending on how much income you’ve earned in the past year and how much you’ve paid in taxes to your resident country. Some expats find that deductions and exclusions like these mean they don’t owe any taxes – but even in cases like this, expats must file Federal Tax Returns each year.
FBAR and FATCA are other common reporting requirements and are triggered depending on how much money in total expats have in their overseas accounts.
4. Take action immediately.
The Streamlined Filing Procedures, like the OVDP, could end at any time. If you’re behind on your taxes, the very best decision you can make is to become compliant as soon as possible! If the IRS discovers your non-compliance before you have come forward, your chance to take advantage of the amnesty programs will have come and gone. The intricacies of expat tax preparation can be complex, so if you decide to file by yourself, make sure you do some research first! Alternatively, engaging with a tax expert who specializes in expat tax preparation is your best bet.
Greenback Expat Tax Services specializes in expat taxes, so you can be sure that we can help you with the most complicated situations. Our expat-expert accountants are ready and waiting to answer any of your questions. Contact us today to get started.