If you are a US citizen or Green Card holder, you are required to file a US Federal tax return each year regardless of where you are residing. If you are residing outside of the US and have not filed US returns and you were required to do so, you may qualify for the Streamlined Foreign Offshore Procedures program (“Streamlined”) which will allow you to get caught up on your filings without exposure to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties or FBAR (foreign bank and financial account reporting) penalties. Because the US tax filing related penalties can be significant and because the informational returns and forms sometimes come with an automatic $10,000 USD per form penalty for not filing, the Streamlined program is the best and safest way to get caught up on your US filing requirements.
To qualify for the Streamlined program you will have meet the non-residency requirement (described below), have failed to report and pay tax on income from foreign (non-US) financial assets, may have failed to file the FBAR form to report foreign (non-US) financial accounts (Form 114 “Report of Foreign Bank and Financial Accounts”), and the failure to file the required returns and forms resulted from non-willful conduct. Non-will conduct is described by the Internal Revenue Service as conduct due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
The non-residency requirement for US citizens and Green Card holders is such that you must, in any of the most recent three years for which the US tax return due date has passed, have not had a US abode and you were physically outside of the US for at least 330 full days. Abode is described by the Internal Revenue Service as one’s home, habitation, residence, domicile, or place of dwelling. It does not mean your principal place of business. The location of your abode will depend on where you maintain your economic, family and personal ties.
If you qualify for the Streamlined program, you will need to file tax returns for the three most recent tax returns for which the due date has passed, complete and sign a statement of certification stating that you are eligible for the program and that the non-compliance was non-willful, pay all taxes due on the returns and related interest on the balances due and file six years of the FBAR form to report your foreign (non-US) financial accounts if applicable.
Once you have filed under the Streamlined program, you will be required to file tax returns and FBARs (if applicable) each year on a go forward basis as required.
There is also a Streamlined program available for non-residents of the US who had US filing requirements and for US persons who reside in the US. In addition, there are programs available for individuals who filed tax returns but may have missed filing information returns or forms or just missed filing the FBAR forms.
To get your US filing started, contact your Rise Advisor.