Since FATCA has been in force, tax compliance for U.S. tax payers is becoming a serious matter, which should not be ignored, even if you have been living abroad for a long time.
In my previous blog on U.S. tax compliance I mentioned that U.S. citizens and green card holders who wilfully neglected to submit their U.S. income tax filings can take advantage of the Offshore Voluntary Disclosure Program to avoid civil or criminal prosecution and harsh fines.
The other option that tax payers can take advantage of is the Streamlined Filing Compliance Procedures. These are intended for U.S. persons who neglected to file U.S. tax filings due to non-wilful conduct. This basically means that the taxpayer was not aware they needed to make tax filings or pay U.S. income taxes as an honest misunderstanding of U.S. tax law.
And this is not uncommon among accidental Americans (like citizenship gained through parents, birth in the U.S., etc.) and U.S. expats who have resided abroad for a long period of time. By entering this program you will have either no penalty or a 5% penalty (see below).
The Streamlined Filing Compliance Procedures require taxpayers to file the previous three years (not including current year) of income tax returns, pay tax and interest for late payment, file six years (not including current year) of Foreign Bank Account Reports (FBARs) and complete a certification statement certifying that there conduct was non-wilful.
To qualify for the Streamlined Filing Compliance Procedures you must have:
- Resided outside of the U.S. for at least 330 full days for any one or more of the most recent three years and whose failures to comply with U.S. tax law was due to non-wilful conduct. This incurs a zero penalty
- Resided inside the U.S. and have filed U.S. tax returns for all previous years and their failures to report income on their tax returns or foreign financial accounts was due to non-wilful conduct. This incurs a 5% penalty.
You can find more information on the Streamlined Filing Compliance Procedures here.
Learn more about the Offshore Voluntary Disclosure Program (OVDP) in my video or previous blog – this is for US persons who knowingly neglected to pay their taxes and this may expose such persons to potential criminal liability.
If you have a more specific question on U.S. tax compliance just get in touch. We’re here to help.
- Watch our compliance videos
- Watch our FATCA in under 2 minutes video
- Watch our complete US Tax Services Video Series
- Read our blog on FBARs and Deadlines
- Official IRS website
- IRS – How to Make an Offshore Voluntary Disclosure
About US Tax Practice GmbH:
US Tax Practice offers U.S. tax services in Switzerland. It is the go-to tax preparation service and compliance practice for U.S. tax payers. Located in Schaffhausen, Switzerland, the company was founded by Patrick Evans, a U.S. tax accountant (CPA) and U.S. citizen determined to work with his clients’ best interests in mind. US Tax Practice GmbH services include U.S. Income Tax Preparation, U.S. Tax Compliance, Foreign Bank Account Reporting (FBAR), Tax Planning and Optimization, and Expatriation.