If you are not currently up to date on your tax returns or FBARs, the best option to become compliant is the Streamlined Procedure announced by the IRS in 2014.
It requires filing of last 3 years of tax returns and 6 years of FBAR (regardless of how many years the taxpayer has missed). The best part is that the penalties you might be liable to pay for failure to declare foreign bank accounts (those are the really scary ones - please see Article on FBAR Penalties) will be waived.
We’ve helped hundreds of expats get up to speed with their U.S. tax returns using this program and have developed the unique expertise with it.
Questions You Might Have When Deciding on Whether to Join SP
1. Am I Eligible To Apply For the IRS Streamlined Procedure?
- The only thing that would prohibit you from being allowed into the SP is whether your failure to declare your non-US bank accounts was willful.
- That means that you
- A) Knew that you had to file them
- B) Failed to file them
- Aside from this one parameter, there are really no qualifications that would prevent you from joining
2. What Are the Advantages/Disadvantages of joining the SP?
- We really see no disadvantages to the SP. We think this is as good of a deal as IRS will offer and highly recommend all those who are not currently compliant to use it.
- We’ve helped hundreds of clients join it and have had a universal success rate.
3. Why should I join the Streamlined Procedure vs simply filing my overdue tax returns?
4. I Am Up To Date With My Tax Returns But I Have Not Filed FBAR For ALL My Non-US Accounts -- What Are My Options?
The US treasury requires that US Citizens/GC Holders remain current and compliant with FBAR requirements for the last 6 years. Your filing option depends on whether you had non-reported interest from foreign bank accounts and whether you are subject to additional reporting requirements.
5. What If I Did Not Have to File FBARs - Would I Be Saved From Regular Tax Return Penalties?
- Yes - you would also not be subject to the failure-to-file and failure-to-pay penalties and accuracy-related penalties.
6. Why Should I Opt For The Streamlined Program And Not OVDP?
OVDP, which requires an attorney's assistance, presents a substantial expense for the client. It involve filing 8 years of returns, paying tax and penalties due for all years, paying FBAR civil penalties, and paying lawyer fees for OVDP assistance.
Meanwhile the Streamlined Procedure is significantly cheaper, requires no attorney involvement and absolves client from fees and penalties.
The only occasion where OVDP is preferred, is where the IRS has already started a civil investigation. In such case OVDP serves to keep the consequent penalties at bay.
7. I am up to date with my tax returns, but I did not complete form 5471 for my foreign corporation, what do I do?
- There is a special program for this - the Delinquent Informational Return Program. Examples of informational returns are 5471 (foreign corporation), 3520-A (foreign trust)
- Participating in this program would entail 3 amended returns for each of the past 3 years (assuming you have not filed the informational return for all three years), and forms 5471 (assuming that is the missing form) for each year. Finally, a reasonable cause statement must be attached.
- Potential for filing FATCA (form 8938) if the balance on the company accounts (previously unreported) puts the taxpayer over the threshold
8. I am up to date with all my FBARs, but have not filed tax returns - what do I do?
If you filed FBAR for all years but did not file tax returns, we can help you file via the Streamlined Procedure.
This will involve 6 years of FBAR (which you have already filed), 3 years of tax returns, and a certification letter (personal affidavit).
As long as your FBARs are correct and contained all of your non-US financial accounts (checking, savings, brokerage, pension, etc) - they do not need to be refiled. You will, however, need to include the print out of the confirmation of your FBARs being filed from the treasury (if you need to check if they were filed, please see https://www.taxesforexpats.com/faq.html#60).
9. Can I File SP If I Live In the US?
10. Can I File Via the SP If I Am Already Doing OVDI?
Short answer - Yes.
If you qualify for the Streamlined Procedure but have been accepted into one of the offshore voluntary disclosure programs prior to September 1, 2012, you may opt out of the offshore voluntary disclosure program and request the Streamlined Procedure.
To opt out, you need to inform the examiner of your decision in writing. This is an irrevocable election and you will receive a notification letter confirming this. The examiner assigned to your case will then be able to make a risk determination of your submission and close your case according to the Streamlined Procedure. If all submission items for the voluntary disclosure program have already been submitted to the IRS, you will not be required to make a second submission for the Streamlined Procedures.
11. If I file under SP with TFX, does it mean that I am automatically accepted to the program?
We will advise on your eligibility for the SP upon review of your Tax Questionnaire.
If we find that your situation makes you eligible for the SP, we will proceed to file you via the program (most likely scenario). Otherwise if we think that you would not qualify, we will advise on alternate filing routes.
Please bear in mind that the program is really an application for amnesty. While there is no guarantee that you will be accepted into the program, we have a lot of experience filing under the procedure and we closely comply with IRS requirements for it. Therefore our success rate is excellent.
12. I have just found out that I need to file US taxes and want to get up to date. Should I contact the IRS beforehand and let them know I will be sending in my forms soon?
Do NOT contact the IRS in any sort of pre-emptive move. In the very odd case that they get in contact with you, let them know that you are working on compliance with us. Our usual turnaround is generally faster than any deadline they'll impose on you, anyway.
The best first contact to make is a completed tax return.
Questions You Might Have on Logistics of Filing SP with TFX
1. Is there a difference between the Streamlined Certificate and Letter?
They are eactly the same thing.
Certificate = Letter
From the IRS:
Complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S.certifying (1) that you are eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed (see instruction 8 below); and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct. You must submit the original signed statement and you must attach copies of the statement to each tax return and information return being submitted through these procedures. You should not attach copies of the statement to FBARs. Failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.
2. How long does it take to complete the returns required for the Streamlined Program?
- We can give a reliable estimate for preparation of one year - up to 15 working days. Doing multiple years will obviously take longer but the increase in time required is certainly not linear (i.e. you won’t have to multiply number of years by 15 days). After the first return is prepared it will go much quicker - as we will have asked all questions already and simply keep producing returns.
- Most cases are handled in around a month to two months - your mileage may vary depending on complexity of your case and how quickly you get the information we require to us.
3. How should I complete the TQ if I am doing the streamlined program?
The Streamlined Program (SP) requires filing of the last 3 years of tax returns and 6 years of FBARs. In other words, you'll have to file 2010-2015 FBARs and tax returns for 2013-2015.
- Please create a Tax Questionnaire (TQ) for 2010 and complete the Main-General and Non-US Accounts tabs.
- Create TQ for 2011; select 'copy from 2010' in the creation prompt and update the Non-US Accounts tab with relevant data. Repeat for 2012.
- Create TQ for 2013, copying from 2012. Then, answer the rest of the questionnaire (as this is the first year when a full tax return will be completed).
- Continue the process for 2014, 2015. This process is also described in the FAQ
On June 16, 2017 - these dates will shift to 2011-2016 FBARs, and 2014-2016 Tax Returns
4. I am asked to provide my details on the Non-US Accounts tab but it’s blank. What should I do?
- Please make sure to answer YES to the first three questions. Only after they are answered, you will be able to provide details about your foreign accounts.
5. How do I get the return to the IRS? Can you e-file it for me?
- Unfortunately Streamlined Procedure can not be e-filed. We will file the FBARs for you electronically and provide PDF returns of all your returns along with detailed instructions on how to prepare the package and send it to the IRS.
6. I don't have $10k across my accounts for every year, do I still have to complete the Non-US accounts section for every year?
- Yes - unfortunately so.
- Joining the SP requires filing FBAR for the last 6 years (regardless of whether you were required due to the balances on your accounts in specific years).
7. Can my spouse and I file streamlined together, or do we each need our own submission?
- Yes - as long as they file jointly.
- Our price for the joint SP filing is the same as for an individual SP.
- However - if they have separate foreign accounts and need duplicate set of FBARs, this will add extra $50 per FBAR form.
8. Do I have to provide my bank statements?
No - you do not have to provide bank statements. We will only ask you for self-reported details about the accounts
9. What kinds of accounts should be reported in the Non-US Accounts tab?
The basic rule is this - if you have a financial account outside of the US, it must be reported.
Here is the full list of accounts that need to be reported:
Financial (deposit and custodial) accounts held at foreign financial institution
Foreign Mutual Funds
Foreign-issued life insurance or annuity contract with a cash-value
Indirect interests in foreign financial assets through an entity
Foreign financial account for which you have signature authority
Foreign stock or securities not held in a financial account
Foreign partnership interests
Foreign hedge funds and foreign private equity funds
10. Can I provide estimated balances on the Non-US Accounts tab?
- Yes - if you don’t have exact figures, you can provide your best effort estimate.
11. How do I report the interest earned on the accounts I provide details for in the Non-US Accounts tab?
- You should report all interest earned in the Supplemental tab of the TQ (sub tab Passive Income / Interest)
12. How should I pay for the service?
- We accept all major credit cards.
- Payment is due when your return is prepared. It will be uploaded to the server and locked pending payment.
- As soon as you post payment in our system, it will unlock the return for your review automatically.
13. I would like to ask some questions by phone, how can I do that?
- Our standard service fees do not include telephone service.
- However - that option is available to you. You can schedule a phone consultation with a CPA in your Client Area. It costs $100 for 30 minutes.
14. What is the Certification Letter?
- As part of the Streamlined Procedure you are required to submit an IRS Certification Letter (http://www.irs.gov/file_source/pub/irs-pdf/f14653.pdf)
- You could either complete it yourself or we could do it for you.
- In general we recommend having this done professionally.
15. How much does it cost for you to prepare the Certification Letter?
- The price for us to prepare this service is $300.
16. What years do I have to file?
The Streamlined Program (SP) requires filing of the last 3 years of tax returns and 6 years of FBARs. In other words, currently the years to file are: 2013-2015 for tax returns and 2010-2015 FBARs.
- Until June 16, 2017, you cannot file 2014, 2015, 2016 - because 2016 is not yet delinquent.
The IRS has also issued guidance on extension filings for those who are behind on their returns.
- File extension for current year (ie - until June 15, 2017, you can file an extension for 2016), and prepare the SP program for current overdue years (2013-2015 Tax Returns, 2010-2015 FBARs)
17. How will IRS inform me about my Streamlined Procedure filing?
The IRS no longer sends the Streamlined Program acceptance letters (they have done so in the past). So the best news you can have is not hearing anything from them.
If the IRS needs additional documentation, the request will arrive approximately within 2 months after your filing.
18. In our reading of the FBAR requirements we have a reporting question. Can you tell us if we will need to report the end-of-year account value for each account, or the highest account value within the year?
- FBAR requires reporting the highest value of the account during the year.
19. How does preparing SP vs single year return work?
- Let us explain how this process works:
- We start by preparing the earliest (i.e. current - 3 years) return. Once you pay for this return you will have access to it for your review. If the return is okay, we will proceed to the next year and follow the same procedure. This way we do not roll forward any mistakes from year to year and have to go back and make numerous changes. Once we get to the last year, we will then supply you with the 6 years of FBAR's for your review. Once you review and approve the FBARs, we e-file the 6 years of FBARs. When we receive the e-file confirmation we will provide you a copy of that form along with detailed instructions on how to put the package together for mailing to the IRS.
- If you would like to pay only one time, you can prepay your bill in the Engagement letter section of your client profile.