The June deadline has come and gone, but if you haven’t filed your taxes yet, there’s still time to get caught up and become compliant with the IRS this year. Not sure where to begin? Don’t fret – the information you need to know is right here in this Q&A.
By Greenback Tax
I Haven’t Filed Taxes In Multiple Years – What Now?
For starters, don’t let yourself worry too much – the IRS isn’t as harsh on expats who make an honest and serious effort to get caught up and become compliant. There are several ways to get caught up on late taxes, and the number of years you need to file will help determine the best method for you to use.
An expat tax pro can be helpful in identifying how many years of back taxes you need to file and what documents you’ll need to have on hand. In any event, you will need to prove expat status for each year of late taxes that you file. You may also owe penalties for filing late or failure to pay taxes on time, if you owed money to the IRS.
Note that you may also need to file a Foreign Bank Account Report (FBAR) form for qualifying foreign financial accounts for the years you missed. The FBAR requires you to report any foreign accounts that exceeded $10,000 at any point during the tax year, whether it was in a single account or spread across multiple accounts.
How Can I Get Caught Up?
Depending on your situation, there are a number of methods for getting caught up. The IRS does ask that you file for all years that you’re behind, no matter which option you choose. There are two amnesty programs offered by the IRS, which provide taxpayers the opportunity to get caught up without facing serious penalties.
- Streamlined Filing Procedures – This program is in place for taxpayers who have not willfully hid money in offshore financial accounts – they simply weren’t aware of their obligation to file. Expats who utilize the streamlined program will need to submit three years of delinquent tax returns and six years of delinquent FBARs in order to become compliant.
- Offshore Voluntary Disclosure Program (OVDP) – Alternatively, this program is for taxpayers who willfully hid money in offshore accounts. These individuals will face penalties for their failure to file, though they can avoid criminal charges by voluntarily coming forward and utilizing the OVDP to get caught up.
- Late Filing – If you happened to miss the tax deadline this year, you also have the option of simply filing your expat taxes late in order to become compliant. This option tends to be best for those who are not severely delinquent, while the Streamlined program is best for those who are severely behind (i.e. three years or more).
What Information Do I Need to Have?
It’s helpful to have previous years’ Federal Tax Returns available, as well as tax returns from your host country; but if you don’t, that’s okay. You will need to have statements of income, interest earned, capital gains, mortgage interest or student loan interest paid, housing expenses, dependent information, etc.
Can I E-File My Late Expat Taxes?
E-filing is available if you are filing 2015 or 2016 late tax returns, as long as you aren’t filing under the Streamlined Filing Procedures. If you are filing Streamlined, you will need to mail paper copies of your tax return to the IRS.
Where Should I Start?
A good place to begin is by setting up a meeting to discuss these late filing options with an expat tax professional, so you can select the best option for your situation.
Once you’ve determined the best route to take, you’ll want to gather all of the necessary documents and begin working on your late taxes as soon as possible, in order to become compliant before the New Year rolls around.