IRS Expat Filing Program--Amnesty

The Internal Revenue Service (IRS) has an amnesty program for Expats called the IRS Streamlined Procedures. Late filers can remedy their delinquency by filing income tax returns for the prior three years and any delinquent FBARs for the prior 6 years. To qualify taxpayers have to be a non-resident for U.S. tax purposes and able to establish that their previous non-compliance was not willful. Taxpayers that qualify can avoid penalties, but must pay all taxes due with interest. Many Americans living abroad qualify for special tax benefits, such as the foreign earned income exclusion and foreign tax credit, but they only get these benefits by filing a U.S. return. U.S. taxpayers who own foreign financial accounts must report those accounts to the U.S. Treasury Department, even if the accounts accounts don’t generate any taxable income. The return for reporting foreign bank and financial accounts (FBAR) is filed electronically.

The taxpayer will have to file a) three years of previous income tax returns; b) six years of FBAR (Foreign Bank and Financial Accounts); c) a Non-Willful Statement (Form 14653). The Form 14653 requires that taxpayers provide specific reasons for their non-compliance. On the form, the IRS suggests that taxpayers provide “the whole story including favorable and unfavorable facts. Specific reason, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open it or use it. And explain your contacts with the account/asset including withdrawals, deposits and investment/management decisions. Provide a complete story about your foreign financial account/asset. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor, and a summary of the advice….”

The reporting requirement for foreign financial assets is for the aggregate of all: a) all of taxpayer’s personal bank accounts; b) any bank account that taxpayer owns or has signing authority over; c) foreign pension accounts; d) stock trading accounts.

Bowman Law Firm

Gene M. Bowman, Attorney (active status) & CPA (retired status)