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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Jane Mepham (00:07)
And we're back with another Shortie This is a format where we take a time using the cross border space and in 10 minutes or less, Manasa and I will give you a high level definition, at least tell you exactly what it means. So every now and again, I'll meet prospects and anytime I start working with a prospect or 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, 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, Manasa is going to tell us what streamlined filing is, what penalties are involved, if any, and exactly what it is, Manasa.
Manasa Nadig, EA (01:16)
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
3520, 3528, 8938, and so on. And it should also, 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. 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.
Jane Mepham, CFP® (02:57)
What about if you're overseas? Is that still applicable?
Manasa Nadig, EA (03:02)
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 and six years of non-filing of your FBARs.
And there is no penalty calculated on that if you were overseas for all of those six years. Yes.
Jane Mepham, CFP® (04:05)
Okay, and I think that's it. What if it ended?
Manasa Nadig, EA (04:09)
Yeah,
definitely. Okay, I was just waiting to see if you had any follow-up questions.
Jane Mepham, CFP® (04:14)
No, I have
anything else. You've done a pretty good job. Yes.
Manasa Nadig, EA (04:18)
All right, so dear IMC listener, that was our Shortie on what is streamlined filing. Thank you for listening. And if you want to listen to more such shorties, go to our website, theimcafe.com, or find our podcast on any streaming service and do give us a follow there. Thank you.