Ep 45: What Is English For "Streamlined Filing Procedures?"
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IRS expects you to report your overseas or foreign assets when you file taxes if you are a US tax resident (US citizen, Green card holder, or you meet the substantial presence test).
Many people are unaware of the requirements, and the IRS seems to acknowledge this.
IRS has come up with an amnesty program, which allows you to catch up and be tax compliant if you haven't reported your overseas assets.
In this episode, we discuss the process, known as "Streamlined Filing," and explore the penalties involved, if any, as well as the proper steps to follow.
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Are you Tax-compliant With Your Overseas Assets? - Free Guide - Scroll to the bottom of the page.
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The speakers' views and opinions discussed in this episode should not be considered financial, tax, or legal advice. Consult your advisor for any legal, cross-border tax, and financial advice.
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Speaker 1 (00:06):
Welcome to the International Money Cafe podcast, the show where we filter out the noise on cross-border taxes, finances, and life in the us. I'm your host, Jen Hams, certified financial planner, founder and owner of elgon Financial Advisors.
Speaker 2 (00:21):
And I'm your host, man, Nadik, enrolled agent, owner and founder of AM and Tax and Business Services. Join us on this journey as we explore the unique challenges faced by inbound outbound families and businesses on taxes, compliance, and financial planning. Let's get to the show
Speaker 1 (00:43):
And we are back with another shorty. This is a format where we take a time using the cross-border space and in 10 minutes or less, Melissa and I will give you a high level definition, at least tell you exactly what it needs. So every now and again, I'll meet prospects and anytime I start working with a prospect or I, I, I start working with a client. Actually, even during the prospect meeting, I ask them, have you been filing your overseas assets? Assuming obviously they have staff overseas. And a lot of times they'll say, oh, we didn't know we're supposed to do that. We didn't know we're supposed to be including overseas assets. The good thing is IRS is aware of that, that not everybody knows what they're supposed to be filing. And so they've come up with this amnesty program, which allows you to catch up and come into tax compliance. And the process is called streamlined filing. So in today's episode, MANA is going to tell us what streamlined filing is, what penalties are involved, if any, and exactly what it's mana.
Speaker 2 (01:52):
All right, so let's call this the mechanics of streamlined filing. So basically streamlined filing. You do these three things. First, you amend three previous years of your US tax return, or if you've never filed it, you file three previous years of tax returns. And this should include any missed international information returns like a 35, 20, 35, 20, a, 89, 38, and so on. And maybe it should also include foreign unreported income and foreign taxes that you may have paid. And you can take credit. So one three previous years of US tax returns filing or amending, second filing previous six years of your FBARs under the bank secrecy Act, again filing or amending if you have not filed at all. Third, you pay a 5% penalty on the highest total balance at the end of the year on any one of those six previous years. So you look at the six previous years of your balances in the foreign bank accounts, and that's the basis. And the third is you let them know what the reasonable cause or the non willful conduct was and why these were not filed before. So basically Jane, that is the mechanics of streamlined filing.
Speaker 1 (03:30):
What about if you overseas? Is that still applicable?
Speaker 2 (03:35):
Oh, yes, yes. So there's two different types of streamlined filing and one is called the streamlined domestic offshore procedures, and the other one is called the streamlined foreign offshore procedures. So the process that I just explained or the mechanics is the same for both, but the one big difference is that that 5% penalty under Title 26 that the domestic tax residents pay is not applicable if you have lived abroad. So let me quickly explain. The SFOP entails that you should have lived outside the US for these three years of amended tax returns in six years of non-filing of your FBARs, and there is no penalty on, uh, calculated on that if you were overseas for all of those six years. Yes.
Speaker 1 (04:40):
Okay. And I think that's it. Yeah. <laugh> would've ended <laugh>,
Speaker 2 (04:46):
Definitely. Okay. I was just waiting to see if you had any follow up questions. No, I
Speaker 1 (04:50):
Don't have anything else. You, you've, you've done a pretty good job. Yes.
Speaker 2 (04:54):
All right. So dear IMC listener, that was our shorty on what is streamlined filing. Thank you for listening. And if you want to listen to more securities, go to our website, the i im cafe.com or find our podcast on any streaming service. And do give us a follow there. Thank you.
Speaker 3 (05:18):
Thank you for listening to the International Money Cafe podcast. The content is for informational and educational purposes only, and should not be used as a substitute for professional advice. Seek the advice of your qualified service provider with any questions you may have regarding your cross border finances and tax needs.