IRS Tax amnesty program for US expats: facts and myths

Dec 14, 2017

What are the IRS Tax amnesty programs for US expats?

If you haven’t caught up with your US expat taxes for a while, IRS Tax amnesty program is the legal and safe way to get back on track. Many taxpayers who fell behind their taxes are afraid to start the process. Mostly due to various misconceptions about the tax amnesty programs. Keep on reading to find out what the facts and myths are.

The U.S. tops the list of countries with the highest cost of tax avoidance. It stands at nearly $200 billion every year. Yes, the numbers are huge! No wonder why the IRS finds new ways to track the wealth of US citizens who live and work abroad. As you know, there are FBAR, FATCA, and heavy penalties. But at the same time, the IRS introduced amnesty programs! They are a reliable yet easy way to catch up with your US expat taxes.

Do you know what are the available deductions for Americans living abroad? Check out our guide here

US expats who want to catch up with their taxes: where do you start?

You may have moved abroad decades ago but have never filed your US expat tax return as you have never been aware of US tax obligations. It happens more often than you think. There are thousands of people who are in the same boat like you. In this case, your failure to file was due to “negligence, inadvertence or mistake”. This makes your conduct to be non-wilful and allows you to qualify for the Streamlined Foreign Offshore Procedures. Yet there are many ways to interpret what a non-wilful conduct is. As well as who can take advantage of this program. However, the rule of thumb is you haven’t intentionally tried to avoid paying taxes. And the IRS hasn’t started auditing you after sending you letters of notifications few times in a row.

Filing late taxes as a US expat is an uncomplicated and painless step that you need to take if you want to live worry-free life and not being scared of the IRS hunting you down. As long as you come forward voluntarily, the IRS will already treat you better! They are way more strict with those Americans who were caught by them.

What are the myths about filing late taxes as U.S. citizens abroad?

We receive dozens of questions about the IRS amnesty programs every day. We want to clarify a few most popular myths that people have! And we recommend seeking a professional advice when it comes to filing your late taxes with Streamlined procedures.

Myth #1: It is time consuming, difficult and expensive process to get into tax compliance with the IRS Streamlined Procedures.

Contrary to popular belief that the IRS threatens everyone, who failed to file and pay their taxes, to take away all their assets or property, the tax amnesty program makes the process of catching up with your US expat taxes easy and hassle-free. There are more than 70,000 people who participated in the Streamlined Procedures since it’s introduction in 2012 and then a revision in 2014. Assuming you qualify for the Streamlined Offshore Procedures, all you have to do is to file prior 3 years of tax returns and 6 years of FBARs. And don’t let the 6 years of FBARs scare you, it’s a simple process as described here.

Myth #2: You will face hefty penalties when disclosing your tax history to the IRS

You can eliminate penalties which may be imposed on you for failing to file your federal tax return or FBAR. Even though every taxpayer’s situation is different, generally the IRS tax amnesty program allows most of the delinquent Americans abroad to come clean without fines. It’s important to remember that every U.S. person wishing to take advantage of the Streamlined Procedures and suffer no penalties has to meet following requirements:

  1. You need to meet a non-residency requirement, which states that you are a U.S. citizen, a Green Card holder or other U.S. person for tax purposes, who didn’t reside in the U.S. for the most recent 3 years for which the U.S. tax return due date has passed.
  2. Your failure to report all income was a result of the non-wilful conduct.

You need to remember that another amnesty program as Offshore Voluntary Disclosure Program (OVDP) has civil and criminal penalties installed in the program by default because the participating taxpayers failed to report and pay taxes of their foreign financial assets due to intentional causes of tax evasion. Though there still may be some reduced penalty rates (for example, 27,5% penalty of the top value of your offshore assets) it’s hard to predict how the IRS will treat every individual who takes part in OVDP as everyone’s foreign financial assets and scope of tax avoidance varies from case to case.

Myth #3: You can hold off to get into tax compliance as long as you can because there is no expiry date for the IRS tax amnesty program

Now there is no official announcement on whether the tax amnesty programs will be there for a certain period of time. We recommend that you get back on track with the IRS sooner than later. The officials recently made it clear that the program will end when it feels it’s hard to believe that a delinquent taxpayer, who can take advantage of the Streamlined Procedures, has decided to not take part in it due to not being aware of this amnesty program. And it simply means that you now have a wilful cause of failing to file and pay taxes.

Taking an advantage of the IRS Amnesty program as a delinquent American taxpayer abroad

The IRS offers 2 main amnesty programs, such as Streamlined Procedures and OVDP. Of course, you can start the process by yourself if your case isn’t too complicated. However, we recommend everyone to seek a professional help. A U.S. expat tax expert can help to assess your individual tax case.

It’s important to remember that OVDP is an amnesty program for those who had willful and criminal conducts. They were hiding their foreign financial assets and will be facing severe financial penalties. Even the imprisonment may come into the picture. We do not recommend you to start compliance process by yourself, especially if you may fall into this category.

At 1040 Abroad, we have tax experts, who specialize in US expat taxes and help you and your fellow US expats to live a worry-free life while we take care of your taxes.

We are a tax firm, which helps hundreds of US expats abroad. They deal with different tax cases and consequences each taxpayer may face. Get started today with us and fulfill your tax obligations in a legal, time and money saving manner.


U.S. Taxes For American Expats E-book

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The only e-book about U.S. Expat Taxes you need to read! Covers

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