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The Streamlined Filing Compliance Procedures (SLP) provides a light at the end of the tunnel for qualifying global US taxpayers seeking IRS amnesty from late-filing US tax penalties.
As a US citizen or permanent resident living overseas, getting a handle on your tax responsibilities is essential. The program offers a streamlined process for expats to catch up on their US tax obligations.
In the following article, we explore how this option facilitates peace of mind from the IRS. In some cases, catching up using the SLP can even yield tax savings.
Reviewing the basics: Who needs to file US taxes (and why)?
The US uses a citizenship-based taxation model.
This means that US citizens and Green Card holders are required to file annual tax returns if their worldwide income exceeds the IRS-defined annual minimum threshold.
These amounts adjust each year with inflation and are aligned with your tax filing status.
| Taxpayer Status | 2023 Tax Year (the taxes you file in 2024) | 2024 Tax Year (the taxes you file in 2025) |
|---|---|---|
| Single | $13,850 | $14,600 |
| Married, filing separately | $13,850 | $14,600 |
| Married, filing jointly | $27,700 | $29,200 |
| Head of household | $20,800 | $21,900 |
You might think that you’re off the hook if your income is below these amounts. However, filing can sometimes be financially advantageous, especially if you anticipate a refund from the IRS.
For example, you might want to file if:
- You’ve had taxes withheld from your paycheck
- You’ve made estimated tax payments
- You’re eligible for refundable tax credits
Evaluating a streamlined process: What exactly are the Streamlined Procedures?
Consider the Streamlined Filing Compliance Procedures as your opportunity to “get back on track” with tax compliance. This program is designed to help eligible taxpayers who’ve unintentionally missed some tax filings catch up without the usual penalties.
To take advantage of this program, your failure to file must be “non-willful,” which we’ll explain in more detail later.
A note about the Streamlined Filing Compliance Procedures terminology:
While "Streamlined Filing Compliance Procedures" is the official name of this program, other synonymous terms include "streamlined procedure" and "streamlined procedures."
The evolution of the Streamlined Filing Compliance Procedures
Prior to this program, the only option available was the Offshore Voluntary Disclosure Program (OVDP), known for its lack of leniency. In 2010, the introduction of the Foreign Account Tax Compliance Act (FATCA) resulted in a spike in non-compliance cases, causing outrage in the global expat community.
In response to the need for a more user-friendly solution, the IRS introduced the Streamlined Filing Compliance Procedures in 2012.
Two paths to tax compliance: Understanding your streamlined options
Two types of Streamlined Filing Compliance Procedures exist. Depending on your US residency status, you’ll choose between:
- The Streamlined Domestic Offshore Procedures (designated for US taxpayers residing within the US), and
- The Streamlined Foreign Offshore Procedures (intended for taxpayers living abroad e.g. expats).
Below is a breakdown of what each option entails. Both aim to facilitate a smooth return to tax compliance, though they have different rules and penalties based on residency.
| Criteria | Streamlined Domestic Offshore Procedures | Streamlined Foreign Offshore Procedures |
|---|---|---|
| US residency requirement | Resident | Non-resident |
| Nature of tax filing default | Non-willful | Non-willful |
| Returns to file | – Income tax: Most recent 3 years – FBAR: Most recent 6 years | – Income tax: Most recent 3 years – FBAR: Most recent 6 years |
| Penalties | 5% of foreign account balance | None |
| Previous filing of returns | Must have previously filed income tax returns | No requirement |
| Type of tax return | Amended (1040X) only | 1040 or 1040X |
| Number of default years | Must not have defaulted in filing returns for each of the previous three years | N/A |
Who qualifies for the Streamlined Procedures? Your quick checklist
Wondering if the Streamlined Filing Compliance Procedures are right for you? Here’s a quick rundown of the criteria you’ll need to meet to take advantage of this helpful program.
- Your failure to file must be considered “non-willful,” indicating it was due to an honest mistake or oversight. The IRS defines non-willful conduct as a result of a mistake, inadvertence, a good-faith misunderstanding of the requirements, or negligence.
- You shouldn’t be under any IRS civil examination or criminal investigation. If you are, this program isn’t an option for you.
- If you’ve had any penalty assessments for delinquent or amended returns in the past, they must be paid in full.
- You’ll need a valid Taxpayer Identification Number (TIN), which is usually your Social Security Number (SSN). If you don’t qualify for an SSN but do qualify for an Individual Tax Identification Number (ITIN), you can still be considered for the program.
- If you’re not a US citizen or permanent resident, you must not have met the “substantial presence test”1 for any of the last three years.
Additional criteria apply if you’re filing the foreign version of the procedure, the Streamlined Foreign Offshore Procedures. To qualify, you must:
- Be a US citizen or permanent resident and not have had a US residence for at least one year out of the most recent three.
- Be a US citizen or permanent resident and have been outside the US for at least 330 full days during one of the three tax years you’ll be filing for.
Resources for Accidental Americans
If you’ve found yourself with US citizenship but have never lived or worked in the States, you might be scratching your head about your tax obligations. Don’t worry; the Streamlined Filing Compliance Procedures have got you covered.
Accidental Americans often discover their US tax obligations late in the game, usually because they were born in the US to foreign parents or acquired citizenship through a US parent. If this sounds like you, here are some resources to help you navigate this unique situation.
Websites and online tools
- IRS Website: The IRS has a dedicated section for Accidental Americans, offering guidelines and FAQs to help you understand your tax obligations.
- Streamlined Filing Compliance Procedures Page: This is your go-to source for all things related to the Streamlined Procedures, including eligibility criteria and filing instructions.
- Taxpayer Advocate Service: This independent organization within the IRS can help you resolve issues and provide free tax advice.
- Bright!Tax Blog: Our blog offers a wealth of information tailored for Accidental Americans, from detailed guides to expert advice.
Professional help
- Certified Public Accountants (CPAs): A CPA specialized in expat taxes can guide you through the filing process and ensure you’re taking advantage of all available tax benefits.
- Tax Attorneys: If you’re facing more complex issues, a tax attorney can provide legal advice and representation.
Community support
- Expat Forums and Social Media Groups: These platforms offer a wealth of shared experiences and advice from fellow Accidental Americans.
- Accidental American Associations: Organizations like the Association of Accidental Americans provide advocacy and support.
Remember, being an Accidental American doesn’t mean you have to navigate the US tax system alone. These resources are here to help you every step of the way!
Recapping the benefits of catching up on US taxes
Wondering what’s in it for you when you catch up on your taxes through the Streamlined Filing Compliance Procedures? Let’s talk benefits:
- Peace of mind: No more sleepless nights worrying about IRS penalties or audits. This program offers a penalty-free way to become tax-compliant.
- Financial savings: Avoid the hefty fines that usually come with late tax filings. Plus, you may be eligible for benefits like the Foreign Earned Income Exclusion or the Foreign Tax Credit.
- Tax credits and stimulus payments: Some expats discover they’re eligible for additional benefits like the Child Tax Credit or, for a limited time, Stimulus Payments.
- Simplicity: The Streamlined Procedures are designed to be straightforward, making it easier for you to file your taxes without the headache.
- Legal safety: By becoming compliant, you reduce the risk of legal repercussions, giving you one less thing to worry about.
- Future-proofing: Once you’re caught up, maintaining your tax compliance in the future becomes a breeze.
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