Traveling around the world is often fun and exciting. You catch up with new opportunities. In some cases, expats decide to never reside stateside again. While it is always good to embrace the new, there are some old things that one should never forget about. Especially if it is about filing US taxes.
US is one of the two countries where citizens are taxed on their worldwide income regardless of the location. If you are wondering what the other country is, it is Eritrea.
Despite this, there are many expats who have not submitted tax returns in years. Most probably because they were not aware of it in the first place.
The good thing is recently, President Trump has announced an Economic Impact Payment – a kind of stimulus check for all citizens around the world.
According to reports, it is a $1200 non-taxable income (plus $500 for any children who are US citizens) that is automatically sent to the Americans after they have filed their tax returns for 2018 and 2019.
In order to help citizens get compliant and be able to claim the payment, the IRS has an amnesty to stop any late filing penalties and file back taxes. While it is a good initiative, there are some of you who are still wondering if the Streamlined Foreign Offshore Procedure is indeed that important. Here are some things that you would need to know about disqualification from the procedure and if there are any penalties.
What is Streamlined Foreign Offshore Procedure?
Streamlined Foreign Offshore Procedure is a part of the Streamlined Filing Procedure.
It involves three steps –
- Submission of file federal tax returns for last three years (all prior tax returns are waived).
- Submission of a complete disclosure explaining the reason behind the failure, which could be either they were unaware or were deliberately trying to avoid paying taxes.
- Make separate foreign bank account reporting for a period of six years.
Who is Not Eligible for this Procedure?
A taxpayer will not be eligible to enter the streamlined procedures if a civil examination of taxpayers’ returns has been initiated by the IRS regardless of whether the examination relates to undisclosed foreign financial assets.
Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation will also be ineligible to use the streamlined procedures.
It is advised that you consult with an agent first if you are likely to face a disqualification.
Will there be any penalties upon failure to satisfy offshore tax obligations?
Failures to fulfill offshore tax obligations can result in penalties, huge fines, and interest. However, expats can avoid the fines and penalties by entering into the IRS’s Streamlined Offshore Voluntary Compliance program.
Can Anyone Apply for this Program?
The Streamlined Voluntary Offshore Compliance program is meant only for taxpayers who have not willfully violated the law.
Willfulness here means intentional / voluntary disregard of a known legal duty.
Hopefully, the article has been able to provide answers to some of the frequently asked questions and you can find the necessary guidance to help you complete the procedure if you are falling under this category. Let’s make traveling fun and hassle free even when it comes to clearing up your taxes.
