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Expat Articles » Delinquent on US Taxes? OVDP and the Streamlined Procedure Can Help


Delinquent on US Taxes? OVDP and the Streamlined Procedure Can Help

By David McKeegan, Greenback Expat Tax Services

US expats who are behind on their US taxes may be relieved to know that there are options to help get caught up. Depending on the situation, there are two programs developed by the IRS to encourage delinquent taxpayers to come forward and become compliant with their tax obligation. In doing so, they can avoid or lessen the stiff penalties that may otherwise be incurred. The IRS requires US expats to file taxes, as well as FBAR if they qualify. FBAR (Foreign Bank and Financial Accounts Report) must be filed if you have a bank or other financial account, or signing authority over such an account, and the aggregate value of the account(s) exceeds $10,000. Penalties for not filing FBAR are steep—a minimum of $10,000 per infraction, as well as possible criminal prosecution. Expats who failed to file FBAR in the past are excellent candidates for one of the IRS’ amnesty programs. But which to choose? Tough question, but here’s an overview of both programs to help you decide.

The Streamlined Program

The Streamlined Program is designed specifically for delinquent taxpayers living abroad. Under this program, an individual would file tax returns for the last three years and FBAR forms for the last six years. This is welcome news because prior to the program’s inception, the IRS required delinquent individuals to file at least 6-8 years of taxes and FBAR forms. To qualify for the Streamlined Procedure, you must meet certain low-risk requirements. Mainly, you must have lived outside the US since January 1, 2009, not filed a US tax return during that period and generally owe less than $1500 in back taxes for each of the past three years. According to the IRS, the risk level may be increased if one or more of the following requirements are present:

US expats who are eligible for the Streamlined Procedure receive an expedited filing process and most importantly, no penalties will be assessed.

OVDP

The Offshore Voluntary Disclosure Program (OVDP) came into effect in September 2012. It is similar to the Streamlined Procedure but is designed for those who owe more than $1500 in back taxes and stand to incur greater penalties for their lack of filing. In particular, OVDP is an excellent option for individuals who are delinquent on FBAR filings because of the severity of the penalties. To put things in perspective, if the Treasury Department discovers that you are delinquent on FBAR filing, they can seize up to 50% of your highest balance, fine you $50,000 for each violation and investigate possible criminal prosecution. With OVDP expats receive dramatically reduced penalties, which include:

Bottom Line

If you are a US expat with delinquent taxes, it is important to decide quickly which program is right for you. Currently there are no scheduled deadlines for either program, but the IRS has stated that the programs could end at any time without notice.

If you are a low-risk individual and believe you absolutely qualify for the Streamlined Procedure, that is certainly a simpler, less costly option. But if you choose to file for the Streamlined Procedure and the IRS deems you high-risk, you are no longer eligible for OVDP. This could subject you to severe penalties and possible criminal prosecution, including jail time. Clearly the requirements for the Streamlined Procedure are more stringentthan for OVDP so you should be sure you qualify before submitting under this program. The best option is to consult an experienced expat tax service, such as Greenback Expat Tax Services. We can help you determine which program will be most beneficial for you.

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© More About Greenback Expat Tax Services

Greenback Expat Tax Services specializes in the preparation of US expat taxes for Americans living abroad. Greenback offers straightforward pricing, a simple, hassle-free process, and CPAs and Enrolled AgentMs who have extensive experience in the field of expat tax preparation.

For more information about Greenback Expat Tax Services or other US expat tax issues, please email Greenback Expat Tax Services at info(at)greenbacktaxservices(dot)com. You can also visit us at http://www.greenbacktaxservices.com.