Streamlined Tax Amnesty Program

How does the streamlined tax amnesty program work? Are there any fines or penalties?

Who is this amnesty program for? Who can use it, and who cannot?

There are some requirements for people to use the streamlined program – it is mainly for people who are overseas, outside the US. In the last three calendar years, they have to have been outside the US for at least 330 days in one of those years.

The program is intended for those who have, unintentionally, not been filing their US tax returns. They may have been filing local tax returns in their country of residence but have been unaware that they have to file the US ones as well. As part of the program, the person makes a promise in writing on a certification form that they will file their tax returns each year going forward, as once they have passed the unintentional stage of not filing, they cannot fall under the amnesty program’s criteria again, so they must file every year after the programme is done.

What about people who have left the US a long time ago (10+ years)? They might have sporadically filed, or only for the first couple of years after they left, read advice online or at an embassy saying that they did not have to file, or believed they did not have to? Does this program work for them?

It is looked at on a case-by-case basis; an individual’s circumstances are taken into consideration, particularly with regards to the ‘unintentional’ nature of not filing. Once that, and all the other criteria are met, yes, we can recommend to individuals in this position to go ahead and file their tax returns.

Does this program also work for those who have filed their tax returns, but may have filed them incorrectly? For example, if someone who lives outside the US had been filing their federal tax returns, but not for a company they were a shareholder in, would they be able to amend their returns under this program?

It is a common misunderstanding of the law for many Americans living abroad with companies or shareholdings that are under non-American law; they may not know they need to be filing anything from a US tax perspective for the company, even if they have been filing all their other income. They might have been blindsided by all the various requirements the IRS have put in place over the years. Under the amnesty program, they are able to correct or amend their tax returns for any or all of the past three calendar years if required.

The main benefit of using the amnesty program is no fines/penalties for not filing previous tax returns. Is that the same if you are using the program to amend your previous returns?

There are no penalties for late or incorrect filing apply if the criteria for the program is met. Americans abroad would only have to pay tax owed, and any interest for the three years.

As an example, we had a client who had been out of the US for ten years who we were helping prepare their tax returns for the amnesty program. In the unlikely event they have to pay some US tax, would this be for the ten years since they left the US, or just the three years of returns they have to file under the program?

They would just have to file returns for the previous three years under the program (currently 2017, 2018 and 2019). The tax returns are prepared in the same way as the usual annual tax return; the individual can still take advantage of any eligible deductions or exclusions in the normal way. If after this there is any tax owed, it is only for those three years, but interest will be added.

What about all the tax owed for years prior to the three years in question in the program? How does that get calculated and does that need to be paid?

No that does not need to be paid if you qualify for the amnesty program, and the IRS accepts it. The years prior to the three that need filing for the program are written off; they do not need to be filed and tax does not need to be paid. Through this program, you legally come back into tax compliance by just filing and paying for the three years. This is a fantastic opportunity for anyone who has not filed previous tax returns, or has filed incorrectly, but it is a temporary program, and the IRS could pull it at any point, so it is recommended that if you meet the conditions, you use it whilst you can.

Can green card holders use the amnesty program too?

Yes, it is possible for them to use the program too. They are legally permanent residents of the US, so if they meet all the criteria for the program, they can use it.

For US taxpayers who are eligible for the child tax credit refund, can they apply for this whilst they are doing the amnesty program, and backdate it for the previous three years and get the refund?

Generally, this would be possible, however it is important to check if they are actually eligible for this, as it could differ on a case-by-case basis. If they are eligible, they will get money back from the IRS because of this tax credit refund.

What are the main components of this streamline program? What do we bring together to make it happen?

Three calendar years of US tax returns need to be filed, so income, expenses and deduction related information is needed for those years. If the tax returns have already been filed for those years, they need to be looked at to see what the IRS have been told. Any company related issues or other matters that should have been filed with the original return need to be established, and then amended. Basically, all the information for the three years needs to be found, and then all pulled together to file the returns.

A Foreign Bank Account report (FBAR) is also needed for the past six years for the amnesty program. This requires information about any bank accounts outside the US and may include things such as brokerage accounts or investment plans, as well as regular bank accounts. This information is only for filing; it is not taxable. They record information such as which bank it is and the bank’s address, whether the accounts are singly or jointly held, the account number, and a snapshot of the balance (usually either the highest balance during the year, or the balance at the end of the year). There is no tax to pay on it, and no FBAR penalty either.

The third and final component of the streamline program is offshore certification. Simply, it is a statement of fact; it is an explanation of why they previously did not file their returns or filed them incorrectly, and the promise that they will file their tax returns on an annual basis hereafter.

Is there anyone who cannot use the program?

Yes, if the IRS has already been in contact with you about any tax related issues, it would be difficult to qualify for the program. If a document has been filed with them about you, they would begin sending tax notices out. In this situation, you can no longer really say you unintentionally were not filing your tax returns, as the IRS would have made you aware of this through the tax notices, and you have taken no action.

This is something that would need to be doublechecked before filing, as you would not want to submit all the returns and then have them rejected by the IRS.

Americans in this situation need to address what the IRS is asking of them, and then resolve any other tax issues they have. Ultimately, the streamlined amnesty program is something individuals have to come to voluntarily, rather than because of prompting from the IRS.

Why is it a good idea to do the streamlined amnesty program, and how can we help them with the process?

Most people are able to go through the program without having to pay any tax, and end up fully compliant at the end, and do not have any penalties to pay.

We provide full assistance with every part of the program, completing all the forms and preparing them for delivery and filing with clear instructions to clients as to what needs to be done and signed. We have filed over 2500 streamlined applications for our clients now with a 100% success rate.