Filing Taxes Late as a U.S. Expat - FAQ

Filing taxes late as a US expat


1. What happens if I don’t file my US taxes while living abroad?

If you are a US citizen living abroad and fail to file your US taxes, you can face several serious consequences. Firstly, the IRS imposes penalties for both late filing and late payment. The penalty for not filing is 5% of the unpaid taxes for each month or part of a month that a tax return is late, up to a maximum of 25%. If taxes are owed and not paid on time, there’s an additional penalty of 0.5% of the unpaid taxes for each month or part of a month that the taxes remain unpaid, up to 25%.

In addition to these penalties, interest charges accrue on any unpaid tax from the due date of the return until the balance is paid in full. This means that the longer you delay filing and payment, the more you will owe.

Failure to file required tax returns and Foreign Bank and Financial Accounts Report (FBAR) can lead to fines starting at $10,000 per year. These fines can quickly accumulate, significantly increasing your debt to the IRS if you’re unaware of your tax filing responsibilities.

Moreover, not filing your taxes may result in the IRS initiating an audit or investigation, which can be both time-consuming and stressful. In severe cases, there could be legal repercussions, including criminal charges for tax evasion.

Another critical impact of not filing is on your passport. The IRS has the authority to notify the State Department of seriously delinquent tax debt, which can result in the denial of passport renewal or issuance.

It’s vital to understand that being a US expat does not exempt you from filing taxes. All US citizens and green card holders are required to file a tax return and report their worldwide income to the IRS, regardless of where they reside. The loss of tax benefits, such as the Foreign Earned Income Exclusion (FEIE) or the Foreign Tax Credit (FTC), which could otherwise reduce or eliminate your US tax liability, is another consequence of not filing.

The IRS offers programs like the Streamlined Filing Compliance Procedures for expats who haven’t filed due to a lack of awareness about their obligations. These programs can help you become compliant without facing the stiffest penalties, provided there’s no evidence of willful evasion on your part.

Given these potential penalties, interest charges, and legal repercussions, US expats must stay on top of their tax filing obligations and seek professional advice if they’re unsure about the process.

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2. Are there penalties for filing US taxes late if I owe nothing?

Yes, there can be penalties for filing US taxes late even if you owe nothing, but it’s important to consider more than just the lack of direct tax owed. Filing late can have various consequences, including missing out on refunds and eligibility for certain tax benefits. Moreover, there are specific penalties associated with failing to file informational forms that are crucial for US expats and individuals with international financial interests:

  1. Loss of Refunds: The IRS provides a three-year window from the original deadline of the tax return (including extensions) to file if you want to claim your refund. Filing late could result in forfeiting this refund.
  2. Eligibility for Credits and Benefits: Beyond penalties, filing late can impact eligibility for certain tax credits, such as the refundable additional child tax credit. During the COVID-19 pandemic, the IRS issued stimulus checks, and those who did not file might have missed out on up to $3,200 in stimulus payments. However, you can still claim these payments as a Recovery Rebate Credit on your tax return until June 15th, 2024.
  3. Penalties for Informational Forms: Even if you don’t owe any tax, failing to file certain informational forms can result in substantial penalties. Forms such as the Foreign Bank Account Report (FBAR), Form 8938 (Statement of Specified Foreign Financial Assets), Form 3520-A (Annual Information Return of Foreign Trust With a U.S. Owner), and Form 5471 (Information Return of U.S. Persons With Respect To Certain Foreign Corporations) are required to disclose foreign assets and financial accounts. Failure to file these forms can lead to penalties starting at $10,000 per form, emphasizing the importance of compliance even when no tax is due.
  4. Delayed Refunds and Future Loan Applications: Filing late can delay refunds and affect your ability to provide proof of income for loans or credit applications, as lenders often request tax return transcripts.
  5. Statute of Limitations and Compliance Records: The statute of limitations for the IRS to audit your return does not start until you file, keeping the window for audits open indefinitely for that tax year. Maintaining a history of compliance is beneficial for future IRS negotiations or when applying for certain statuses requiring proof of tax filing.

The direct financial penalties may not apply if you owe no tax, but the consequences of not filing informational forms, losing out on tax benefits, and the potential for future financial and legal complications highlight the importance of timely filing. It’s advisable for all US citizens, including expats, to file their taxes and required informational forms on time to avoid these penalties and ensure they receive all entitled benefits.

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3. Can I file US taxes late without penalties?

Yes, it is possible to file US taxes late without incurring penalties under certain circumstances:

  1. Automatic Extension for Expats: US expats automatically receive a 2-month extension to file their tax returns, extending the deadline to June 15th. This extension gives expats extra time to file without penalties, but it’s important to note that any taxes owed are still due by the original April 15th deadline to avoid interest charges.

  2. Requesting an Extension: Any taxpayer can request an additional extension to file their US tax return by filing Form 4868 by the original due date of April 15th. This extends the filing deadline to October 15th. While this extension gives more time to file, it does not extend the time to pay any taxes due. Taxes not paid by April 15th will accrue interest and possibly a failure-to-pay penalty.

  3. Streamlined Filing Compliance Procedures: For expats who were unaware of their filing obligations and have not filed as a result, the IRS offers the Streamlined Filing Compliance Procedures. This program allows eligible taxpayers to file late tax returns without facing failure-to-file or failure-to-pay penalties, provided they can certify that their failure to file was non-willful.

  4. Reasonable Cause: Taxpayers who file late or fail to pay taxes due can avoid penalties if they can show reasonable cause for not meeting the deadlines. This requires providing a detailed explanation, supported by documentation where possible, to the IRS demonstrating why you couldn’t file or pay on time. Reasonable cause does not cover mistakes or oversight but is meant for circumstances beyond your control, such as natural disasters, serious illness, or death in the immediate family.

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4. How do I file US taxes for previous years?

Filing US taxes for previous years involves a specific process to ensure you become compliant with the IRS, especially if you’re a US expat who may have missed filing for one or more years. Here’s a step-by-step guide on how to file your US taxes for previous years:

  1. Gather Your Documents: Collect all necessary financial documents for the years you need to file. This includes W-2s, 1099s, foreign income statements, bank statements, and any records of taxes paid to foreign governments.
  2. Determine Your Tax Obligations: Identify which tax forms you need to file for each year. Common forms include 1040 for individual income tax returns, Schedule B for interest and ordinary dividends, Form 8938 for specified foreign financial assets, and FBAR (FinCEN Form 114) for foreign bank and financial accounts reporting.
  3. Use the Correct Forms for Each Tax Year: Make sure to use the tax forms that correspond to the year you are filing for. IRS forms and tax laws can change from year to year, so it’s crucial to use the correct version to ensure accuracy.
  4. Fill Out Your Tax Returns: Complete each tax return accurately. If you’re unsure about any information, it’s better to seek professional advice rather than risk making a mistake.
  5. Consider the Streamlined Filing Compliance Procedures: If you have not filed because you were unaware of your obligation to do so, the IRS offers the Streamlined Filing Compliance Procedures for taxpayers to become compliant without facing penalties for failure to file. This program requires taxpayers to file the last 3 years of federal tax returns and 6 years of FBARs (if applicable), along with a statement explaining why the filings were not made on time.
  6. Seek Professional Help: Navigating the complexities of back taxes and the Streamlined Filing Compliance Procedures can be challenging. Professional help can ensure that your returns are completed accurately and that you take advantage of all possible avenues to reduce or eliminate penalties and interest.

Introducing 1040 Abroad’s Streamlined Compliance Package

For those looking to simplify their path to IRS compliance, 1040 Abroad presents a Streamlined Compliance Solution priced at $1,800. This tailored offering aims to facilitate your compliance journey, encompassing the preparation and filing of the past three years’ tax returns and six years of FBARs, in alignment with the IRS’s Streamlined Filing Compliance Procedures. Our team of skilled tax experts is committed to providing thorough guidance throughout the process, focusing on precision and efficiency to reduce penalty risks and enhance your tax benefit opportunities. With transparent pricing, our fees encompass everything required for US expats to file, ensuring no hidden costs. The only instances where additional fees apply are for those owning a foreign corporation, foreign trust, or investments in PFICs

Taking proactive steps to file your US taxes for previous years is crucial to becoming compliant and avoiding further penalties. Contact us today to get started on the path to compliance.

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5. Is there a deadline extension for US expats to file taxes?

Yes, US expats are eligible for an automatic deadline extension to file their taxes, providing additional time beyond the standard April 15th deadline. This automatic extension is specifically designed to accommodate the unique circumstances faced by US citizens living abroad.

Automatic Extension for US Expats

The IRS grants an automatic 2-month extension to US citizens and resident aliens who are living outside of the United States and Puerto Rico and whose main place of business or post of duty is outside the United States and Puerto Rico. This extension moves the deadline to file from April 15th to June 15th. It’s important to note that this extension applies to the filing of tax returns, not to any tax payment due. If you owe taxes, interest will accrue from the original April 15th deadline, even if you file later.

Requesting Additional Time

If you need more time beyond the automatic 2-month extension, you can request an additional extension by filing Form 4868, “Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.” This request must be made before the automatic extension expires on June 15th and extends the filing deadline to October 15th. However, like the automatic extension, this additional extension does not grant more time to pay taxes owed without accruing interest.

1040 Abroad’s Free Extension Filing Service

Understanding the complexities and challenges of filing US taxes from abroad, 1040 Abroad offers a free service to help US expats file an extension. If you’re unsure how to file an extension or simply need assistance with the process, please contact us. Our team will file the extension on your behalf at no charge, ensuring you have the extra time you need to accurately prepare your tax return without worrying about the hassle of meeting the initial deadline.

This service is part of our commitment to support US expats in managing their tax filing obligations efficiently and effectively. Taking advantage of this free extension filing service can provide peace of mind and additional time to gather necessary documents, especially for those navigating the complexities of international income and tax credits.

For assistance with filing an extension or any other tax-related inquiries, please reach out to 1040 Abroad. We’re here to help you stay compliant and make the tax filing process as smooth as possible.

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6. What is the penalty for filing US taxes late?

When it comes to filing US taxes late, individual taxpayers face several types of penalties, including late-filing penalties, late-payment penalties, and penalties for failing to submit informational forms. Each of these penalties serves to encourage timely compliance with the IRS’s filing and payment requirements.

Late-Filing Penalty

The late-filing penalty, or failure-to-file penalty, is applied when taxpayers do not file their income tax return by the due date (April 15th) or by the extended due date if an extension was requested (October 15th). This penalty is 5% of the unpaid taxes for each month or part of a month that the return is late, up to a maximum of 25%. For returns filed over 60 days late, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less.

Late Payment Penalty

The late payment penalty is incurred when taxes owed are not paid by the due date. This penalty is 0.5% of the unpaid taxes for each month or part of a month that the taxes remain unpaid, up to a total of 25%. If both late-filing and late-payment penalties apply in the same month, the combined penalty for that month is capped at 5%.

Penalties for Failing to Submit Informational Forms

In addition to the penalties for late filing and payment of income taxes, significant penalties apply for failing to file certain informational forms. These forms include:

  • FBAR (FinCEN Form 114): Non-willful violations can lead to a $10,000 penalty, while willful violations can incur a penalty of the greater of $100,000 or 50% of the account balances.
  • Form 8938: Failing to report specified foreign financial assets can result in a $10,000 penalty, increasing up to $50,000 for continued non-compliance.
  • Forms 3520 and 3520-A: Penalties include a percentage of the transaction value for failing to report transactions with foreign trusts or receipt of certain foreign gifts.
  • Forms 5471 and 8865: These forms relate to foreign corporations and partnerships, with starting penalties of $10,000 per form for non-compliance.

These penalties highlight the importance of not only filing your income tax return on time and paying any taxes owed but also ensuring compliance with the filing requirements for informational forms related to foreign assets and accounts.

Taking Action

For late filers or those concerned about potential penalties, it’s crucial to take immediate action to become compliant. This includes filing any overdue returns and informational forms and paying outstanding taxes as soon as possible. For taxpayers who were unaware of their filing obligations, the IRS offers relief programs such as the Streamlined Filing Compliance Procedures, which can help mitigate penalties.

1040 Abroad recognizes the challenges faced by US expats in navigating these complexities and offers comprehensive support, including a free extension filing service. If you’re unsure about how to proceed with late filings or need assistance with any aspect of your US tax obligations, 1040 Abroad is here to help. Our expertise ensures that you can minimize penalties and achieve compliance with confidence. We offer free tax consultations via email. 

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7.  How many years back can I file US taxes?

To become compliant with IRS requirements, taxpayers who have missed filing their US taxes on time need to file only the last three years of delinquent tax returns. However, for Foreign Bank and Financial Accounts Reports (FBARs), the requirement extends to the last six years. This distinction is critical for managing compliance, especially for those with foreign financial accounts.

The statute of limitations allows the IRS to audit tax returns generally within three years from the due date of the return or the date it was filed, whichever is later, which is why filing the last three years of returns is essential for addressing overdue taxes and minimizing late penalties. For FBARs, the longer six-year filing requirement reflects the importance the IRS places on reporting foreign accounts to prevent tax evasion.

Filing these additional returns and FBARs can also enable taxpayers to claim any tax refund or refundable credit they might be entitled to within this timeframe. Delaying filing beyond these periods risks losing out on potential refunds.

For taxpayers facing difficulties in paying the full amount of overdue taxes, the IRS offers payment plans. These plans provide a manageable approach to settling overdue taxes, helping taxpayers become fully compliant without the immediate full payment burden.

By focusing on filing the last three years of delinquent tax returns and the last six years of FBARs, taxpayers can effectively mitigate the impact of late penalties and ensure they meet IRS compliance requirements. Maintaining timely tax and FBAR filings moving forward is crucial to avoid future penalties and maintain good standing with the IRS.

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8. What should I do if I’ve missed filing US taxes for several years?

If you’ve missed filing US taxes for several years, the first step is to prepare a batch of returns for the last three years to become compliant with the IRS. For those with foreign financial accounts, also ensure to file the last six years of FBARs. Consider using the IRS Streamlined Foreign Offshore Procedures, designed for taxpayers who have unintentionally failed to file. This program allows you to catch up on your filings without facing harsh penalties, provided you qualify as non-willful.

For US expats yet to receive their stimulus checks due to non-compliance, there’s an opportunity to claim these benefits until June 15th, 2024. You may be eligible to claim up to $3,200, which includes payments from the various stimulus packages released in response to COVID-19. Addressing your filing status promptly not only helps in avoiding further penalties but also enables you to take advantage of these relief measures, ensuring you don’t miss out on potential refunds or credits available to you.

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9. What are the consequences of filing taxes late as a US expat?

Filing taxes late as a US expat can have several consequences. The most immediate consequence is that you may be subject to penalties and fines. The IRS charges a failure-to-file penalty of 5% of the unpaid taxes for each month or part of a month that a return is late, up to a maximum of 25%. Additionally, there is a failure-to-pay penalty of 0.5% of the unpaid taxes for each month or part of a month that a return is unpaid, up to a maximum of 25%.

Another consequence of filing taxes late as a US expat is that it can negatively impact your credit score. Late filing of taxes may also lead to an audit or investigation which can be time-consuming and stressful. In some cases, it may even lead to legal issues. Additionally, if you owe taxes, the interest will accrue on the unpaid balance until it is paid in full. It’s important to note that being a US expat does not exempt you from filing taxes. US citizens are required to file taxes and report their worldwide income to the IRS, regardless of where they live.

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10. Is it too late to file my US taxes now?

No, it’s not too late to address your tax situation, even if you’re dealing with late tax filing. Our company specializes in swiftly handling such cases, offering a 2-week turnaround to prepare your tax returns, including for self-employed individuals and those seeking to claim COVID-19 benefits. After preparing your returns, we proceed with the federal tax return filing, ensuring you’re on track to becoming compliant. The IRS provides options for relief from penalties, especially for those who missed filing dates for returns due to understandable circumstances. Act promptly to take advantage of any available benefits and to minimize additional penalties.

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11. How long does it take to process a late US tax filing?

The processing time for a late US tax filing can vary significantly based on several factors, such as the complexity of your tax situation and whether you’re filing as a self-employed individual or with other special considerations. Generally, electronic filings are processed quicker, but for late filings, expect a longer timeline. As your tax preparer, we ensure your documents are ready within 2 weeks, speeding up the preparation phase. While we efficiently manage the preparation and submission of your federal tax return, the IRS’s processing times, especially for returns claiming COVID-19 benefits or requiring relief from penalties, may extend beyond our control. It’s important to have realistic expectations regarding the IRS processing times, particularly for dates for returns that involve complex issues or back taxes.

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12. Can I receive an extension for filing taxes late as a US Expat?

If a US expat’s tax return is already late, they cannot file an extension to file the return. The extension to file is only available to those who are able to file their return on time but need additional time to gather necessary information or documents. In such a case, the individual may face penalties and fines for filing late as well as not being able to claim any refundable credit.

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13. I am a US citizen abroad who never filed a tax return, where do I start?

It’s easier to become tax compliant than you might think. Many Americans and U.S. persons do not even know they still have to file their tax returns when they build their lives elsewhere. There are roughly six million Americans every year in the same situation as you, who also have to catch up with their U.S. tax obligations. The IRS is aware of this fact and so has introduced a few amnesty programs, such as The Streamlined Procedures, where they waive all the penalties for expats!

So if you haven’t filed your taxes yet, don’t fret. Here’s everything you need to know about filing taxes late as a US expat. First of all, gather all of your income and expenses documentation. Most of the time you will need documents from your host country, such as statements of income, mortgage interest paid, housing expenses, capital gains or losses and interest earned. In order to participate in the Streamlined Foreign Offshore Program, you will need to file three years of delinquent tax returns, six years of FBARs (if required), and a certification statement providing a reasonable cause.

Most of our clients do not owe any U.S. income tax because either the amount of foreign tax they have paid can offset their U.S. tax liability or they have used the Foreign Earned Income Exclusion to lower or eliminate their taxable income. In fact, our clients are eligible for certain credits in some circumstances and receive a refund in the form of a paycheck. This is subject to limitation, and so consultation with a tax expert is recommended.

There are still penalties, fines, and interest that could be assessed, and it is essential that you understand this critical fact pertaining to filing taxes late as a US expat. The important factor here is to file your tax returns and then pay before the IRS finds you. If your return wasn’t filed by the due date (including extensions of the time that is given to file), this is what you will need to know:

  • If you’re filing taxes late as a US expat, you may be subject to the failure to file penalty, unless you have reasonable cause, such as the death of a family member, mental illness, alcoholism, bad advice from your accountant, or extended military service.
  • A tax that is not paid in full by the original due date of the return (regardless of extensions to your time to file) may also result in the failure to pay penalty unless you have reasonable cause for your failure to pay in time.
  • Interest is charged on taxes that are not paid by the due date, even if you have an extension of time to file, and is also charged on penalties.
  • There’s no penalty for failure to file taxes late as a US expat, if you’re due a refund. However, you risk losing a refund altogether if you file a return, or otherwise claim a refund after the statute of limitations has expired. An original return that claims a refund must be filed within 3 years of its due date for a refund to be allowed in most instances.

The next step when it comes to filing taxes late as a US expat is to check if you need to file FBAR forms, in case you haven’t listed your foreign bank accounts before. If you have either a financial interest or signature authority over the accounts, and the total value exceeds $10,000 at any time during the calendar year, you will need to file FBAR. The U.S. Department of the Treasury can impose significant penalties for failing to do this, including the seizure of assets.

If you’re still unclear about “How to file late taxes as an expat” or feel lost while catching up with your taxes, don’t hesitate to contact us. We’ve helped hundreds of people to become and stay compliant.

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14. Are there any tax relief options for US expats who file taxes late?

The Streamlined Compliance Filing Procedures is one of the tax relief options for US expats who file taxes late. It is an amnesty program that allows US taxpayers who have failed to report their worldwide income and file required forms such as Foreign Bank Account Reports (FBARs) to come forward and file delinquent returns without facing penalties. Under this program, taxpayers are required to file the last three years of delinquent tax returns and six years of delinquent FBARs. They also need to pay the taxes due on the returns, but the IRS will waive all penalties. It’s important to note that this program is only available to taxpayers who can demonstrate that their failure to file was non-willful. This program is especially helpful for US expats who may not have been aware of their filing obligations or may have neglected to file due to confusion surrounding their filing requirements. It’s worth noting that this program is only available to taxpayers who have not previously been contacted by the IRS regarding their delinquent returns or FBARs, so if a US expat has already been contacted they may not be eligible for the program.

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15. What is the IRS tax expat amnesty program “Streamlined procedures”? How do I qualify?

In June 2014 an updated IRS amnesty program for expats, known as the Streamlined Foreign Offshore Program, was introduced. It is a friendlier way to catch up with U.S. taxes and become tax compliant without facing any penalties. It is available to US expats who have failed to report foreign financial assets and pay all the taxes due as a result of their non-willful conduct.

What is non-willful conduct? The IRS defines this as conduct “due to negligence, inadvertence, or mistake or conducts that is the result of a good faith misunderstanding of the requirements of the law”. This is a very broad definition and leaves a lot of space for free interpretation, which may not be good for you as a taxpayer. Therefore, we recommend that you seek professional advice from an expat tax company.

If you want to catch up with your late taxes and get back into the tax filing system, then you will need to know these main facts about using Streamlined Procedures. First of all, check if you qualify for the Streamlined Foreign Offshore Program. The criteria are as follows:

  • You have spent 330 days in at least one of the last three tax years outside of the United States
  • You are currently non-compliant, meaning that you failed to file one or more tax returns
  • You failed to comply with U.S. tax returns because of a non-willful violation

By using the IRS expat tax amnesty program you need to file the last 3 years of federal tax returns and 6 years of FBARs, certify that your past failure to file was non-willful, and pay any tax that may be due. If the IRS agrees that you are eligible for the program, then there will be no penalties imposed. All the returns must have a valid Taxpayer Identification Number (TIN). For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security Number (SSN).

You may also claim any applicable exemptions, like the Foreign Earned Income Exclusion, and end up not owing any taxes. But to do so, you still need to file and become tax compliant. It’s better to file and pay the tax due before the IRS finds you and imposes its fines, as this will leave you without an opportunity to use the penalty-free way of becoming compliant. So, if the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.

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16. Should I file any additional forms, like FBAR?

First things first, what is FBAR and who needs to file it? Let’s begin by saying that if you have a foreign financial account, be it in banking, investment, or any other, then as an American abroad, you may be required to file FBAR. FBAR stands for Foreign Bank Account Report, which is alternatively called the FinCEN Form 114. In contrast to the other types of taxes that are filed with the IRS, the FBAR is filed with the FinCEN – the U.S. Treasury Department’s Financial Crimes and Enforcement Network.

If you are behind on filing FBAR, we strongly recommend that you catch up with it as soon as possible. Any U.S. person, such as U.S. citizen, U.S. resident, green card holder, Accidental American, is required to file FBAR if:

  • They have financial interests or signatory authority over at least one financial account located outside the United States.
  • The aggregate value of all foreign financial accounts exceeds $10,000 at any time during the calendar year that is reported.

If you have reported and paid tax on all income before, but haven’t filed FBARs for previous years, then you can file the delinquent FBARs along with a statement explaining why the reports haven’t been filed before. The IRS will not impose fine on you if there are no underreported tax liabilities and you have not previously been contacted by them. So to avoid penalties, you need to file delinquent FBARs as soon as possible in order to minimize the chances that the IRS will begin an audit or independently request the FBARs.

At the same time, this option is not available to all taxpayers. If you have failed to file tax returns altogether because you weren’t aware of your tax obligations, then you can bring yourself into compliance by taking advantage of the Streamlined Foreign Offshore Program. It’s a more comprehensive and time-consuming option but when it comes to filing taxes late as a US expat, it comes with a significant advantage: the IRS waives all penalties for U.S. persons abroad if you qualify for this program.

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17. What fines and penalties might I face for filing taxes late as a US expat?

There are two types of penalties from the IRS for expat failure to file taxes: failure-to-pay and failure-to-file penalties. A failure-to-file penalty may apply if you did not file by the tax-filing deadline. A failure-to-pay penalty may apply if you did not pay all of the taxes you owed by the tax filing deadline.

Failure to file: If you’re filing late taxes as a US expat, but within 60 days of your U.S. expat return due date, this will generally equal 5% of the amount of unpaid tax. This same amount applies to each new month that the return is late, but the penalty cannot exceed 25% of the total amount of unpaid tax. Additionally, the minimum penalty for filing more than 60 days past the filing or extension date is 100% of the unpaid amount or $135 (whichever is smaller).

Failure to pay: Filing taxes late as a US expat is half of the deal, so if you failed to pay your taxes, then you are subject to a failure-to-pay penalty. This is assessed at a monthly rate of 0.5% of your actual or perceived tax liability (which also cannot exceed 25% of the amount owed). You can avoid this penalty if you file an extension and pay at least 90% of your owed taxes by the initial due date.

As an American abroad who has paid tax before June 15 you will be charged interest on the amount accumulating from the April deadline. But if you pay your taxes after June 15, then you will face penalties, even if you have an additional extension on the tax deadline for US expats. If you’re hit with both penalties, then a failure to pay the penalty is deducted from the failure to file penalty. However, please note that in 2023 an extension on the US tax deadline for citizens living abroad may be obtained – those of you who are not prepared to file your returns by the US tax deadline for expats or by June 15th, then you can submit Form 4868 to extend the deadline to Oct 15th.

There are cases when expats include a letter with their late tax returns, explaining that they failed to file because they didn’t know about their tax obligations while being overseas, and this may be accepted by the IRS and the penalties waived.

But there are more penalties out there, including serious ones, such as FBAR penalties. If you fail to file the FBAR, the IRS can impose one of two civil penalties:

  • A non-willfulness penalty – this cannot exceed $10,000 and may be imposed on any person who violates the FBAR filing and record-keeping requirements.
  • A willfulness penalty, which may be imposed on any person who willfully fails to file the FBAR, with the ceiling on the penalty being the greater of $100,000 or 50% of the balance in the account at the time of the violation. The U.S. Treasury Department reserves the right to seize up to 50% of assets in overseas bank accounts or $100,000 per account, whichever is the higher.

The passport revocation law, which came into effect in late 2015, allows the U.S. State Department to revoke the passport of any U.S. citizen who owes more than $50,000 to the IRS. It’s quite easy to end up with this tax debt through accrued interest and penalties while living overseas as an expat.

We strongly recommend that all American expats become tax compliant by using the Streamlined Foreign Offshore Program. We have helped hundreds of expats to catch up with their taxes and avoid penalties. We will be more than happy to assess your situation and provide you with guidance pertaining to filing taxes late as a US expat. Contact us now and we will get in touch with you promptly.

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18. IRS hasn’t contacted me, should I still file my taxes?

Yes, we strongly recommend that you file your tax returns and pay any taxes as soon as possible. If the IRS or U.S. Department of the Treasury catch you not filing or failing to pay your expat tax, the penalties could easily escalate to the maximum amount. This includes financial fines and even potential jail time. So do not be afraid to come forward voluntarily as the IRS treats better people who do this, rather than those they catch themselves. We strongly recommend that you become fully tax compliant as soon as you become aware of your tax obligations.

If you continually ignore your U.S. tax obligations, the IRS has the power to do following:

  • File a notice of a federal tax lien (a claim to your property)
  • Seize your property
  • Make you forfeit your refund
  • File charges for tax evasion
  • Revoke your passport

With the introduction and enforcement of FATCA law, it is very likely that the IRS will find you sooner rather than later if you are earning (big) figures of money abroad. It’s just question of time. Your foreign bank will report on your financial assets to IRS as part of FATCA law. Did you know that third parties, such as employers, banks and brokerage firms, are required to report your income to the IRS? If the IRS notices that a third party has paid you income, but you haven’t reported that income on your return, this will immediately lift a red flag.

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3.  What happens if I don't file?

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