How US Expats Can Catch Up on Back Taxes With Form 14653

While it may not seem fair, all Americans — even those living abroad — who earn above a certain threshold must file a US tax return. If you didn’t previously understand your tax and reporting obligations, though, you’re not alone. Fortunately, you may be able to catch up penalty-free with the help of IRS Form 14653.

Form 14653 is a key form for the Streamlined Foreign Offshore Procedures, a key IRS program for expats who have inadvertently fallen behind on their taxes.

But what exactly is this program, who can take advantage of it, and how do you fill out Form 14653? We’ll go over all of this and more below.

The risks of non-compliance

As we mentioned above, all American citizens and permanent residents who meet the minimum income filing threshold must file a US tax return and potentially pay US taxes, no matter where they live in the world.

The filing deadline for Americans living abroad is June 15th — or if that falls on a weekend, the next business day. This year, US expats’ 2023 taxes are due on June 17, 2024 (unless they’ve already filed a request for an extension).

If you fail to file on time, for each month after the due date has passed there is a risk of penalties, particularly if you owe tax to the IRS

As you can imagine, this failure to file and failure to pay penalties can quickly add up. This is where the Streamlined Foreign Offshore Procedures — aka the Streamlined Procedure — can come in handy.

What is the Streamlined Procedure?

The Streamlined Procedure is an amnesty program that helps US taxpayers who accidentally fall behind on their US taxes return to good standing with the Internal Revenue Service. If you qualify for this program, you can submit overdue income tax returns, amended returns, reports, or back taxes without incurring the additional fines mentioned above.

To qualify for the Streamlined Procedure, you must:

• Have a Taxpayer ID number: Typically, this will be either a Social Security Number (SSN) or an Employer Identification Number (EIN)
• Participate voluntarily: If the IRS has already contacted you about failing to file a return or pay taxes, you unfortunately do not qualify for the Streamlined Procedure
• Not have intentionally avoided filing: Your previous failure to comply with US tax and reporting obligations must be non-willful, aka non-intentional. Instead, it should be due to “negligence, inadvertence, or mistake” as a result of a good faith misunderstanding

The Foreign Streamlined Procedure involves:

• Filing tax returns for the past three years
• Filing Foreign Bank Account Reports (FBARs) for the last six years, if applicable
• Filing Form 14653
• Paying any back taxes you may owe the US government

Those who own businesses can catch up on past-due informational entity filings like Form 8858, Form 5471, and Form 3520.

What is Form 14653?

Form 14653 — Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures — is the form you’ll use to formally request amnesty under the Streamlined Procedure.

On this form, you’ll certify that your previous failure to file was unintentional through a personal statement that describes the reasons for your failure to file. Note that those who complete Form 14653 must sign under penalty of perjury. In other words, if the IRS finds inaccuracies or inconsistencies in the form or your statement, you could face perjury charges.

How to complete IRS Form 14653

Accurate completion of Form 14653 requires figures from your tax returns, so it’s best to complete those first. Once you’ve done so, you can return to Form 14653, which essentially acts as a cover page for your procedure. This form is three pages long and has a few distinct sections.

First, you’ll start by filling out your personal information. 

This includes: 

• Your full legal name, as it appears on your Social Security Card
• Taxpayer ID number (most often your social security number)
• Phone number
• Current mailing address

Then, you’ll complete a table detailing:

• Which tax years the past-due returns you’re filing correspond to
• How much tax you owe
• How much interest you owe, calculated from the time payment was due to the submission date
• The total balance due to the IRS

If you’re a legal US citizen or permanent resident, you must certify that you were outside of the US for at least 330 full days for each of the past three tax years. 

If you aren’t a legal citizen or permanent resident, you’ll attach a computation proving that you did not meet the substantial presence test. As part of this, you must disclose how many days you were in the US for all three years included in the returns you file under your Streamlined Procedure.

Explaining the reasons for your failure to file the return

At the bottom of page two, you’ll provide an explanation of why you did not file your tax returns and FBARs,  or pay past-due taxes.

This should include:

• All reasons why you did not report your income, pay taxes, or submit required tax returns and other documents: The IRS asks filers to include all factors, both favorable and unfavorable. These reasons should include details about your individual background, including personal and financial factors. For example, “I was born outside of the US and was never educated on my annual US tax filing obligation, assuming the US only taxed its residents like my home country, the UK”.
• An explanation of where the funds in your foreign bank accounts came from and other details on withdrawals, deposits, and reasons for opening the account: You should also describe the reasons behind your investment and management decisions. If you worked with a professional advisor (e.g. financial planner, investment manager, etc.) you should also include their name and contact information.

Married filers submitting the Streamlined Procedure jointly must include explanations for each partner.

Finally, you’ll certify that all of the information above is true to the best of your knowledge by signing, printing your name, and entering the current date.

If someone else helped you prepare this document, they will enter information in the fields below.

Remember, you are signing this form under penalty of perjury — so it’s critical to review and confirm all of the information before submitting it to the IRS.

Let Bright!Tax guide you through the Streamlined Procedure

The Streamlined Procedure is a great option for qualifying US expats who have fallen behind on tax returns, tax payments, and/or reporting obligations. When done correctly, it can help you achieve tax and reporting compliance with no additional fines or penalties. That said, the Streamlined Procedure can be tricky to navigate on your own.

With the Streamlined Procedure, accuracy is of the utmost importance. Mistakes on your tax returns, FBARs, or Form 14653 can result in a rejection or at worst, perjury charges. To ensure the greatest odds of receiving amnesty under the Streamlined Procedure, it’s best to work with a tax professional.