Forgot about your US taxes? The Streamlined Procedure explained

Have you missed a few years of filing your US tax returns? The team from MyExpatTaxes explains the Streamlined Procedure and how you can catch up on your returns as an American expat living in Switzerland.

The US is one of the few countries in the world that taxes its citizens regardless of their residency. If you're one of the few people who did not know US taxes are an obligation no matter where you are in the world, don't worry. The IRS realised this was a common problem and therefore created something known as the Streamlined Procedure.

The Streamlined Procedure

The Streamlined Procedure allows US expats, who did not know they had to file US taxes, to catch up on their returns without penalties. The procedure, which was implemented in 2012 by the IRS, requires you to file three years of tax returns as well as six years of FBARs (Foreign Bank and Financial Accounts).

Let's say you haven't filed in 10 years. You can use the Streamlined Procedure and only need to file for the last three years - not the last 10. After that, you go right back to being tax compliant in the eyes of the IRS with the knowledge that you must file every year moving forward.

Do you qualify for the Streamlined Procedure?

There are two types of procedures within the Streamlined Procedure: domestic and foreign offshore. The Streamlined Foreign Offshore Procedure (SFOP) is strictly for US expats; you must be an American who is living and earning abroad.

As this procedure is for those who did not know that filing was mandatory abroad, it makes no sense to offer this to individuals who live in the US. On the other hand, there is a separate procedure for those living in the US, who have not declared their foreign assets.

In order to qualify, you must have failed to file tax returns, pay taxes and file FBARs. It has to be shown that you had no idea about US taxes and their importance abroad. This is also known as "non-willful conduct", meaning that it was essentially an honest mistake.

Additional requirements

On top of the qualification list, you need the exact same requirements as you would if you were normally filing a US tax return. You must have a US Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN).

The most important point is that if you were ever contacted directly by the IRS asking about your tax returns, you are automatically disqualified from this procedure. In this case, you must take action before the IRS does, or you could be subject to some hefty penalties.

Filing deadlines

These are the deadlines you should remember when filing your US taxes via the Streamlined Procedure:

• April 15: If you owe the IRS any money, you must file the current year tax return before this deadline.
• June 15: Automatic extension for expats (the recommended date for the Streamlined Procedure)
• October 15: File Form 4868 before June 15 for additional time. It’s also the deadline for FBARs.
• December 15: The latest date to file an extension, plus a written letter asking for the extension.

Remembering these dates can be easily forgotten which is why tax advisors recommend signing up for tax newsletters / emails or simply setting reminders in your calendar.

The sooner you use the Streamlined Procedure, the less stress you'll have because no one can guarantee how long this procedure will be available to US expats. The IRS makes changes every year, so if you haven’t filed yet, don't wait.

Missed a stimulus check?

This year is one of the best years to file your US taxes with the Streamlined Procedure because of the COVID-19 checks that were given out to eligible individuals in 2020 and 2021. During that period, three stimulus checks were issued, totalling 3.200 US dollars. If you didn't claim these checks during the pandemic, there is still time for you to do so.

You do not have to use the Streamlined Procedure to receive your stimulus checks. However, if you're already behind on your tax returns, this procedure is a win-win scenario. In the end, if you qualify, you could end up being tax-compliant for absolutely free after your refunds are issued.

For more information about who qualifies for stimulus checks, check out the US Department of the Treasury website, which highlights all you need to know.

Child Tax Credit

If you haven't filed your US taxes in a few years, chances are you missed out on potential tax benefits. One of the most common of these benefits is the Child Tax Credit, which can give you an amount of up to $2.000.

Through the Streamlined Procedure, you may still benefit from these tax advantages if you meet certain eligibility requirements. 

MyExpatTaxes helps US expats living in Switzerland comply with their American tax obligation. Visit their website today to use their easy e-filing software or to get in touch with a US tax expert.