Special Considerations for Non-U.S. Residents Who Need to Submit Streamlined Filings to the IRS

The IRS’ streamlined filing compliance procedures provide a way for U.S. taxpayers to come into compliance when they are behind on their foreign financial asset disclosures due to inadvertent oversights and mistakes. While U.S. taxpayers living abroad are generally eligible to submit streamlined filings, special considerations apply. Learn more from Maryland tax attorney Kevin E. Thorn, Managing Partner of U.S. International Tax Advisors:

Eligibility Requirements for U.S. Taxpayers Living Abroad

Just like taxpayers residing in the United States, those residing abroad must meet various eligibility criteria to submit streamlined filings. For those residing abroad, the eligibility criteria include:

• FATCA or FBAR Violation – Submitting a voluntary disclosure is exclusively an option for resolving violations related to taxpayers’ foreign financial assets. This includes violations of the Foreign Account Tax Compliance Act (FATCA) and the obligation to file a Report of Foreign Bank Accounts (FBAR) under the Bank Secrecy Act.
• Non-Willful Conduct – To be eligible to submit a streamlined filing, taxpayers must be seeking to correct errors that were “due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”
• Meeting the Applicable “Non-Residency Requirement” – The IRS has established specific “non-residency requirements” for U.S. citizens, lawful permanent residents, and other individuals. All taxpayers must meet the applicable non-residency requirement to submit a streamlined filing. For married couples filing jointly, both spouses must meet the applicable non-residency requirement.

Individuals residing abroad must also comply with the IRS’ prescribed filing procedures for taxpayers living outside the United States (referred to as the IRS’ “offshore procedures”). While these procedures largely mirror those for domestic filers, there are some key differences that require special attention.

What if You Aren’t Eligible to Submit a Streamlined Filing?

What if you are a U.S. taxpayer residing abroad and need to come into compliance but are not eligible to submit a streamlined filing? In this scenario, your options depend on the circumstances at hand.

If you need to correct a non-willful violation other than a FATCA or FBAR violation, coming into compliance may involve submitting an amended or delinquent return and paying what you owe. If you cannot afford to pay what you owe, seeking an installment agreement, forbearance agreement, or offer in compromise may be an option.

If you need to correct a willful violation (whether FATCA, FBAR, or otherwise), coming into compliance may require submitting a voluntary disclosure. This is a very different process that involves very different risks. To ensure that you are making sound decisions with your best interests in mind, you should consult with experienced tax counsel who can provide custom-tailored advice based on your individual circumstances.

Schedule a Call with Maryland Tax Attorney Kevin E. Thorn

Maryland tax attorney Kevin E. Thorn, Managing Partner of U.S. International Tax Advisors, has extensive experience advising U.S. taxpayers living abroad. If you need more information about your options for addressing a U.S. tax law violation, call 240-235-5096 or contact us online to schedule a confidential consultation.