IRS Streamlined Foreign Offshore Procedure for US Expats

Are you are an American expat and haven’t filed a tax return in years? Have you been living overseas and have recently become aware of your filing obligations?

If you an US citizen or green card holder living abroad and have years of unfiled tax returns, you are not alone. The IRS has recognized that many taxpayers overseas have not timely filed their U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form 114 (formerly TD F 90-22.1) and is offering a special procedure to get delinquent taxpayers back on track. The IRS presents a very attractive opportunity to come into compliance in a manner that avoids possible IRS enforcement action and the significant penalties that accompany it

On July 1, 2014 the IRS expanded and modified the Streamlined Filing Compliance Procedures first implemented on September 1, 2012. The program now includes not only individual taxpayers who reside outside the United States but also US individual taxpayers residing in the United States.

The 2 programs are the Streamlined Foreign Offshore Procedure (see below) and the Streamlined Domestic Offshore Program.

If you have any questions regarding these procedures and how it apply to you or would like US Expat Tax Help to prepare the necessary documents for you, contact Stephen Stambaugh.

The IRS has also has a FAQ page regarding for each procedure. Please visit:

For the Streamlined Foreign Offshore Procedure:

http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures-for-U-S--Taxpayers-Residing-Outside-the-United-States-Frequently-Asked-Questions-and-Answers

For the Streamlined Domestic Offshore Procedure:

http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures-for-U-S-Taxpayers-Residing-in-the-United-States-Frequently-Asked-Questions-and-Answers

Am I eligible for the Streamlined Foreign Offshore Procedure?

To be eligible for the Streamlined Foreign Offshore Procedures you must:

1. Be an individual US taxpayer or

2. An estate of a US taxpayer and

3. US citizens must have a valid Social Security Number or

4. Those not eligible for a Social Security Number must have an Individual Taxpayer Identification Number (ITIN) or apply for one and

5. Do not have a US abode and

In one or more of the most recent three years that a US tax return was due (or properly filed extension) has passed

6. Have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and such failures resulted from non-willful conduct and

7. Meet the applicable non-residency requirement (was physically outside the United States for at least 330 full days)

What are the steps involved to participate in the Streamlined Foreign Offshore Procedure?

The steps involved to use the streamlined procedure are:

1. Submit complete and accurate tax returns for the last three years that a tax return is due (for example if filing in 2014, submit the 2011, 2012 and 2013 tax returns). Ensure you include all necessary related informational returns such as the Forms 5471 and 3520.

2. If a tax return has been filed previously, submit a complete and accurate amended US income tax return (Form 1040X) for the last three years that a tax return is due (for example if filing in 2014, submit the 2011, 2012 and 2013 tax returns) together with the required information returns.

3. Include at the top of the first page of each delinquent or amended tax return and at the top of each information return "Streamlined Foreign Offshore" written in red to indicate that the returns are being submitted under these procedures.  This is critical to ensure that your returns are processed through these special procedures.

4. Complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S.certifying (1) that you are eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed (see instruction 8 below); and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.  You must submit the original signed statement and you must attach copies of the statement to each tax return and information return being submitted through these procedures.  You should not attach copies of the statement to FBARs.  Failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.

5. Submit payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts.  Your taxpayer identification number must be included on your check.  You may receive a balance due notice or a refund if the tax or interest is not calculated correctly.

6. If you are not eligible to have a Social Security Number and do not already have an ITIN, submit an application for an ITIN along with the required tax returns, information returns, and other documents filed under these streamlined procedures. See the ITIN page on www.irs.gov for more information.

7. If you seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, submit:

  • a statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
  • a dated statement signed by you under penalties of perjury describing:
  • the events that led to the failure to make the election,
  • the events that led to the discovery of the failure, and
  • if you relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
  • for relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.

8. Mail all your documents and necessary payments to:

Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn:  Streamlined Foreign Offshore
Austin, TX 78741

9. For each of the most recent 6 years for which the FBAR due date has passed, file delinquent FBARs according to the FBAR instructions and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.  You are required to file these delinquent FBARs electronically at FinCen.  On the cover page of the electronic form, select “Other” as the reason for filing late.  An explanation box will appear.  In the explanation box, enter “Streamlined Filing Compliance Procedures.” 

What if I don’t meet the criteria for the Streamlined Filing Compliance Procedure?

If you do not meet the criteria for the Streamlined Filing Compliance Procedure, an alternative Offshore Voluntary Disclosure Program announced on January 9, 2012 and updated on July 1, 2014 may be a more appropriate option for taxpayers with higher compliance risk, depending on the facts and circumstances. Please contact us for other options to become compliant with the IRS.

Disclaimer of Liability: This publication is intended to provide general information to our clients, friends and readers. It does not constitute accounting, tax, or legal advice; nor is it intended to convey a thorough treatment of the subject matter.

IRS Circular 230 Disclosure

To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this document is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing, or recommending to another party any transaction or matter that is contained in this document.

Last updated: January 27, 2015