US expats using Streamlined Procedure for filing US taxes | Tom Griffiths
Tom LR Griffiths is a tax advisor and consultant, specialising in US expatriate tax matters
Tom LR Griffiths
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Tom Griffiths - US taxes streamlined Procedure

How expats can use the Streamlined Procedure for filing US taxes

Many American expats often become so engrossed in living their everyday lives in their new country of residence that filing US taxes becomes a second thought.

This is especially true when you have a demanding job and family commitments that not only require your attention but equally deserve the majority of it.

Migrating to work and live worldwide is an expatriate adventure that many covet, but as an American citizen, you’re still required to remember your responsibilities to the US.

The truth is no one likes spending too much of their valuable time considering taxes, which is why US tax experts and accountants exist. But so often, the realisation creeps up on you that you haven’t been filing your US tax returns each year and are concerned about the consequences.

The good news is that the IRS has created a system that enables you to catch up with any missed payments without paying a late penalty fee which is known as the Streamlined Filing Compliance Procedure.

The U.S. Department of State estimates that there are around 9 million expats living abroad; each one of them must continue to fulfil their tax filing obligations set out by the IRS annually.

The fact that American expats still need to file their US taxes even when they live and work abroad would seem absurd to many; however, this is indeed the case, and the US is only one of two countries (the other being Eritrea) that operates this unique tax system.

Even if you pay local taxes, you are still required to file your taxes every year with the US. But this is why it’s not uncommon for expats to have lapsed in paying their US taxes because it seems like you’re going to be double taxed.

Thankfully, it is entirely possible to catch up without facing harsh penalties and without being double taxed too.

Because missing annual tax filing was such a common occurrence, the IRS brought in a new amnesty for Americans living abroad in 2012.

Previously, the Streamlined Procedure was more strict, but thankfully the IRS removed these restrictions in 2014 to ensure a wider audience could get caught up on their taxes.

Will I qualify for the Streamlined Procedure?

Expats utilising the Streamlined Filing Compliance Procedure means they can claim provisions such as the Foreign Tax Credit or the Foreign Earned Income Exclusion to help reduce or even nullify your tax burden. In some cases, there can even be an unexpected refund.

The snag with this procedure is it only benefits you if you contact the IRS voluntarily. To do this, you’ll have to file your last three federal returns and up to six years of Foreign Bank Account Reports, whilst also providing a statement explaining why you didn’t previously file. If they’ve contacted you, it does not apply.

To prove eligibility for the Streamlined Procedure, you must include a signed statement certifying this fact and send it to the IRS.

To qualify, you must:

  • Be able to prove the reason you didn’t previously file was that you weren’t aware you had to.
  • You also cannot have resided in the US for one or more of the three most recent tax years.
  • You have physically lived outside the US for at least 330 full days during one or more of the three most recent tax years.

How do I prepare for the Streamlined Procedure filing?

The simplest way to prepare is to contact a US expat tax specialist who can provide the most up to date and accurate advice whilst also supporting you through the entire process.

To some, this process can seem daunting, while to others, it can just seem like a drain on their valuable time because it requires filing several years of tax returns. Either way, enlisting the help of a US taxes expert will make life simpler and the whole experience far less stressful or a pain.

Here’s what to do:

  • Choose an expert US tax advisor to save time, ensure accuracy, and avoid an audit
  • Organise your documentation for the past three years
  • Gather the last six years statements from your foreign financial accounts

Filing US taxes from abroad is complex at the best of times; getting everything right and filing is in your best interests. So it’s wise to seek advice from a US tax specialist to ensure it’s done smoothly and swiftly.