Loading…

Get your US tax filings up to date via the Streamlined program

If you’ve fallen out of compliance with your US tax obligations through no fault of your own, the IRS’s Streamlined program is a straightforward way to get up to date, with significant protection from penalty exposure. Here’s the advantages and qualifying criteria. 
US tax reporting requirements

US tax reporting requirements

The US is unlike any other tax jurisdiction because if you’re a US citizen or green card holder, you remain within the US tax net even if you have moved away from the US or have never lived there at all. You must file a US tax return each year if your income exceeds certain filing thresholds and you must meet certain reporting obligations each year. For example, you must file the Foreign Bank Account Report (FBAR) if you have more than $10,000 in aggregate in non-US financial accounts. 

It’s common for some Americans to not realise that their tax obligations follow them abroad. In fact, “Accidental Americans” is a term for those who don’t realise they have ever had any. An “Accidental American” is generally someone born in the US who moved abroad at a young age, or someone born abroad to American parents, and so had little connection with the US as an adult. The Streamlined program may also be appropriate for someone who thought that they had been keeping up with their taxes, diligently filing returns and FBARs every year, but then discover an omission that requires additional reporting.

If you discover such reporting obligations it’s likely to be quite daunting and a source for stress and worry. After all, no one wants to find themselves on the wrong side of the IRS. We have considerable experience with helping clients navigate the pitfalls present for the unwary to guide them through bringing their tax affairs up to date and staying compliant.

About the authors

Allan Wilkinson

+852 3192 7083
wilkinsona@buzzacott.hk
LinkedIn

Virginia Zee

+852 3192 7084
zeev@buzzacott.hk

US tax reporting requirements

The US is unlike any other tax jurisdiction because if you’re a US citizen or green card holder, you remain within the US tax net even if you have moved away from the US or have never lived there at all. You must file a US tax return each year if your income exceeds certain filing thresholds and you must meet certain reporting obligations each year. For example, you must file the Foreign Bank Account Report (FBAR) if you have more than $10,000 in aggregate in non-US financial accounts. 

It’s common for some Americans to not realise that their tax obligations follow them abroad. In fact, “Accidental Americans” is a term for those who don’t realise they have ever had any. An “Accidental American” is generally someone born in the US who moved abroad at a young age, or someone born abroad to American parents, and so had little connection with the US as an adult. The Streamlined program may also be appropriate for someone who thought that they had been keeping up with their taxes, diligently filing returns and FBARs every year, but then discover an omission that requires additional reporting.

If you discover such reporting obligations it’s likely to be quite daunting and a source for stress and worry. After all, no one wants to find themselves on the wrong side of the IRS. We have considerable experience with helping clients navigate the pitfalls present for the unwary to guide them through bringing their tax affairs up to date and staying compliant.

The Streamlined program

The Streamlined program

The IRS, to its credit, recognised the problems encountered by such non-wilful US individuals and so introduced the Streamlined Filing Compliance Procedures, with specific rules for taxpayers residing outside of the US. This allows them to get up to date without having to file every single tax return or form that they have missed. Considering some taxpayers could have been outside of the US for decades this is a very helpful relief. There is also a version of this program for US residents but in this article we are focused on non-residents.

Historic reporting obligations should be rectified as soon as practical once you realise that there’s a problem. It’s certainly better to go to the IRS before the IRS notices and begins to ask its own questions.

What are the advantages of the Streamlined program?

What are the advantages of the Streamlined program?

There are two main advantages for this program; the limited number of filings required and the penalty protection.

In most cases, if you qualify you will be required to file three years of late income tax returns or amended returns to correct errors, along with six years of late Foreign Bank Account Reports. If you’ve been out of the US for longer than three years, this can result in a significant reduction in your filing obligations and therefore in both the cost and hassle of getting up to date. If you own a non-US business, you may be required to go back to 2017 in certain situations due to rules in place for that year.

If you qualify, you will not be subject to failure to file or failure to pay penalties, accuracy related penalties, information return penalties or FBAR penalties. Considering the civil penalties for the latter can be up to $10,000 per failure to file, that is clearly of great benefit. Any tax due would need to be settled and late payment interest would also remain payable.

Who qualifies for the Streamlined program?

Who qualifies for the Streamlined program?

To qualify for the Streamlined program, your non-compliance will need to be considered “non-wilful”. The IRS defines this as “conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law”. Careful consideration should be given to all relevant facts and circumstances to make this determination, and part of the program requires an explanation to be provided to the IRS in support of this.

You will qualify for the non-resident side of the program if you did not have a US abode and you were physically present outside of the US for at least 330 full days in at least one of the three years where returns are required. The location of an abode is based on family, economic and personal ties and is not necessarily just where property is owned.

If you are eligible, the Streamlined program remains an excellent way to get up to date with US tax filing obligations.

Get in touch
Get in touch

If you’ve recently become aware of your US tax obligation, or identified an issue with your US tax filings, fill out the form below and one of our US tax experts will be in touch to help you get your filings up to date. If your situation is complex and you require the assistance of a suitably qualified US lawyer, we can to introduce you to legal advisers from our trusted network, who have the necessary experience to help you. 

Please complete all required fields above.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
Close iconClose icon backback
Your search for "..."
did not yield any results.
... results for "..."
Search Tags