Traveling around the world is often fun and exciting. You catch up with new opportunities. In some cases, expats choose never to be in a state again. While it is always good to embrace the new, there are some old things that should never be forgotten. Especially when it comes to filing US taxes.
The United States is one of the two countries where citizens are taxed on their worldwide income regardless of location. If you’re wondering what the other country is, it’s Eritrea.
Even so, there are many expats who have not filed tax returns for years. Most likely because they weren̵
The good thing is that President Trump recently announced a payment for economic impact – a kind of stimulus check for all citizens around the world.
It is reportedly $ 1200 non-taxable income (plus $ 500 for children who are US citizens) automatically sent to Americans after they file their 2018 and 2019 tax returns.
To help citizens comply with regulations and claim payment, the IRS has an amnesty to stop late filing penalties and reclaim taxes. While it’s a good initiative, some of you still wonder if the streamlined offshore overseas process is actually that important. Here are some things you need to know about disqualification from the procedure and if there are any penalties.
What is an optimized foreign offshore procedure?
The optimized foreign offshore procedure is part of the optimized registration procedure.
It involves three steps –
- Submission of federal tax returns for the past three years (all previous tax returns are waived).
- Submit a full disclosure explaining the reason for the failure. This could either be because they don’t know about it or are purposely trying to avoid paying taxes.
- Prepare separate reports on foreign bank accounts for a period of six years.
Who is not eligible for this procedure?
A taxpayer is not eligible to participate in the Optimized Proceedings if the IRS has initiated a civil review of tax returns, regardless of whether the review relates to undisclosed foreign financial assets.
Similarly, a taxpayer under investigation by the IRS Criminal Investigation may not be able to use the streamlined procedures.
It is recommended that you contact an agent first if you are likely to be disqualified.
Will there be penalties if offshore tax obligations are not met?
Failure to meet offshore tax obligations can result in penalties, hefty fines, and interest. However, expats can avoid the fines and penalties by participating in the IRS’s Streamlined Offshore Voluntary Compliance program.
Can anyone apply for this program?
The Streamlined Voluntary Offshore Compliance Program is only intended for taxpayers who have not done so intentionally break the law.
Intent here means willful / voluntary disregard of a known legal obligation.
Hopefully the article has been able to answer some of the frequently asked questions, and if you fall into this category, you can find the guidance you need to complete the process. Let’s make traveling a breeze, even when it comes to clearing your taxes.