Many Americans living abroad have proclaimed, “I’m so glad I don’t have to file U.S. taxes anymore.” Sadly, many of them get high fives! The taxation of Americans abroad is complex, requiring guidance from someone other than your dad. Many Americans do have U.S. reporting obligations and some penalty exposure. Learn more because the only high five you need is from the Internal Revenue Service.   

Written for Expat Network by RoseMarie Guaglieri, H&R Block Expat Tax

I’m a US Citizen Abroad, Do I have to File a US Tax Return?

For U.S. citizens living abroad, the obligation to file a U.S. tax return is a fundamental responsibility and an annual filing requirement. This is true regardless of where you live, tax payments you make to a foreign government, or tax treaties your country may have with the U.S. Yet, our Expat Tax Team at H & R Block meets with thousands of U.S. expats each year who have not submitted tax filings in decades, and many others who do not have a tax filing but must report their foreign bank accounts (FBAR).  

What’s worse is that many clients have come to us after receiving well-meaning guidance from other Americans to lay low: if you have gone undetected so far, why risk it now? There are countless social media posts of Americans abroad providing incorrect tax advice to each other. Tax compliance for U.S. expatriates is quite complex, and honestly, most U.S.-based accountants do not have experience with taxes for expats, so it’s tough to expect most well-meaning Americans to understand. 

While avoiding Uncle Sam’s detection may have worked in the past, its effectiveness is not likely to continue. The Internal Revenue Service (IRS) has dramatically increased its attention toward offshore activities, and its ability to identify Americans living abroad has an all-encompassing global reach. You are likely to get caught up in the IRS’s net at some point, and the consequences of noncompliance can be severe. 

The good news is, if you were unaware that you had a filing requirement, the IRS has provided a way to catch up voluntarily and penalty-free. If you are in this predicament, you may qualify for the IRS Streamlined Filing Offshore Compliance Procedures.  

And there’s better news! Due to expatriate concessions, an increased standard deduction, and tax credits, many expats end up with a zero-tax bill and, in some cases, a refund!

There’s still time to Claim the Third Stimulus Payment!

Speaking of refunds, did you know Americans abroad are eligible to collect the U.S. stimulus payments? While the opportunity to claim the first and second stimulus payments has passed, you still have time to claim the third and final stimulus check if you act quickly and file before April 15, 2025. That may sound like you have time. However, our experience shows that gathering the data needed to comply with the Streamlined Filing Offshore Procedures takes time, so acting now is essential.

Also, given that the Streamlined Filing Offshore Procedures program is essentially a form of tax amnesty, the IRS can end this program at any time.

If that is enough incentive to take control of your current situation, get tax compliant, and claim that last stimulus check, let us help you get started!  

Let’s explore the program further if you want to learn more before taking the next step.  

Do I Qualify for Streamlined Filing Offshore Procedures?

To qualify, you must:

• Represent truthfully and substantively that your lack of filing was “non-willful.”

• Have lived outside the United States for at least 330 full days during one or more of the three most recent tax years and not maintained a U.S. abode.

The IRS uses a standard of willfulness defined as voluntary, conscious, and intentional. According to this standard, noncompliance is “non-willful” If you made an honest mistake or had a good faith misunderstanding of tax law and did not intend to evade taxes or conceal income.

A typical scenario is a client of ours who is, an “Accidental American” born in the U.S. during her dad’s brief employment. She returned to her home country at age two and did not know her U.S. tax obligations. She was surprised when asked to provide U.S. tax returns as part of a grant application to attend a U.S.-based education program. She reached out to us, and with a little help, she got caught up and applied for and received the grant.  

What is Included in the Streamlined filing?

Filing taxes under the Streamlined Foreign Offshore Procedures includes:

• Filing the last three federal tax returns (or amended returns, if needed)
• If applicable, filing the last six FBARs
• A self-certification that includes a detailed statement of “your story” that supports your failure to file was “non-willful.”
• Paying any taxes due

What if I Don’t Qualify for the Streamlined?

The IRS Criminal Voluntary Disclosure Program: If you have willfully failed to comply with your tax or tax-related obligations, this program allows you to become compliant without facing criminal penalties, but you will have to pay tax, interest, and penalties. The ‘voluntary’ part is critically important as Americans who the IRS identifies before complying voluntarily with their tax obligations may not be eligible for amnesty. This is true for all the IRS amnesty programs.

Delinquent FBAR or International Information Return Procedures: If you have filed annual tax returns but were unaware of the FBAR or other informational reports (i.e., a required Form 3520 filing due to agift from a nonresident), you could qualify for amnesty under the Delinquent FBAR or International Information Return Procedures.

U.S. taxpayers with foreign bank accounts or financial interests may need to file the Report of Foreign Bank and Financial Accounts (FBAR).  FinCEN Form 114 is required when the combined balance of foreign accounts totals more than $10,000 at any point during the calendar year. When determining if you meet this threshold, include the value of all non-U.S. bank accounts, brokerage accounts, stock, mutual funds, most pensions, and insurance with cash value.
Failure to file FBAR results in punitive penalties. However, filing through the Delinquent FBAR and Information Report Procedures program allows you to correct past FBAR violations and avoid these severe penalties. This is one of the main incentives for Americans to report voluntarily.

Why Don’t You Take the Next Step, Let Us Help

We strongly recommend that every American living abroad become compliant to avoid losing the privilege of amnesty. We understand there is much to unpack; navigating this process alone can be overwhelming. Let us do the heavy lifting and help you. Take the next step:  create an account and set up a consultation with one of our dedicated expat tax experts. Anastasia R. was glad she did and shared that her H & R Block Expat Tax advisor “was incredible, very patient, and did a great job explaining and supporting every step of the journey.”

Quick Reminder!

Just one more reminder—if you are timely filing your tax returns, remember that October 15th is the extension deadline to file your individual return. There is always a big rush when you get closer to this date, so start your filing now!

Reach out so we can support you on your journey.