Missing the tax deadline could lead to IRS penalties. If you’re a US expat, the tax filing date was June 15th. Unless you filed for an extension, that means your US taxes are technically late, if you haven’t filed yet.
Filing your taxes late often comes with penalties for each month you’re late. There are also additional penalties if you end up owing taxes to the US Government. But, if you’re a US expat, there’s a way to catch up on your tax returns without worrying about penalties stacking up. It’s called the Streamlined Procedure.
Americans living abroad who weren’t aware of the tax filing requirement or deadline could avoid penalties with the Streamlined Procedure. Part of this process includes submitting IRS Form 14653. But what exactly is this tax form and how do you qualify for this tax amnesty program? We’ll explain how Form 14653 could help you get back on track and meet your tax requirements, without worrying about IRS late fees.
What is the Streamlined Procedure?
Before filling out Form 14653, you should understand the Streamlined Procedure and all of its requirements. Short for the Streamlined Filing Compliance Procedures, this process functions as a tax amnesty program for US expats. It’s offered to help Americans living overseas catch up on their taxes, without fear of penalties.
Through the Streamlined Procedure, you file three past due tax returns. You must also file your last six years of FBARs (Report of Foreign Bank and Financial Accounts), if required. If you own a business, you can also use this process to catch up on past-due business filings, such as the Foreign Disregarded Entities (FDE), Foreign Corporation disclosures, and foreign partnership disclosures.
In order to qualify for the Streamlined Procedure, you must meet a few criteria. First, you must have a Taxpayer ID number (such as a Social Security Number). Next, the IRS must not have already contacted you about failing to file a previous return. Lastly, you must attest that you did not file due to non-willful conduct. This means you did not file your US taxes because you were unaware that you needed to or you did not know the deadline had passed. This is when Form 14653 comes into play.
What is Form 14653?
This IRS form must be filled out so that you can file for amnesty under the Streamlined Procedure. The official name of Form 14653 is: Certification by US Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures.
Form 14653 certifies that your failure to file your taxes was not a willful act, which means you did not purposefully avoid filing. Any US expat hoping to receive tax amnesty through the Streamlined Procedure must fill out this form.
When you sign this form, you’re signing under penalty of perjury. This means you’re attesting that the information in the form is accurate. If the IRS finds inaccuracies in Form 14653, you could face fines for perjury.
How to Complete IRS Form 14653
When you file past returns through the Streamlined Procedure, you have to submit delinquent or amended returns along with this form. Since you’ll need information from these tax returns to fill out Form 14653, it’s better to start with your past-due tax returns and then fill out this form last.
Form 14653 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
- Your taxpayer ID number (for most people, this is your SSN)
- You phone number
- Your current mailing address
Then, you’ll list the tax return years you’re filing (in sequential order), followed by the amount of tax and any interest you owe. Lastly, you’ll total up your balances.
If you’re a legal US citizen or resident, you’ll certify if you were outside of the US for 330 days for the tax years of your delinquent returns. If you’re not a legal citizen or resident, you’ll attach an explanation of why you did not meet the substantial presence test under I.R.C. sec. 7701(b)(3). This computation must include the number of days you were in the US for all three years included in your Streamlined Procedure filing.
At the bottom of page two, you’ll fill out the personal certification section. Here, you’ll provide the reasons why you did not file your tax returns or pay past-due taxes. You 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.
- 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. It should also include investment and management decisions and the name and contact information of your professional advisor (if you used one).
- Separate explanations of reasons for married filers submitting jointly.
Lastly, you’ll finish the form by certifying the statements in the form are true (to the best of your recollection) by signing and printing your name and the current date. If someone else prepares your tax forms, they will provide their information below yours. You are signing under penalty of perjury. So you should review and confirm all data is accurate before submitting it to the IRS.
While you can fill out and submit this form on your own (along with your delinquent tax returns and FBARs), if you have any questions about the Streamlined Procedure, Bright!Tax is eager to help! Our expert CPAs can guide you through each step – either through a paid consultation or our Streamlined service offering (they’ll fill out the paperwork for you!).
What does non-willfulness mean?
It’s important to understand the IRS’s definition of non-willfulness before filling out Form 14653. In order to certify that your failure to file was non-willful, you must not have filed due to good faith misunderstanding or lack of knowledge of the tax requirements.
If you blindly ignored the tax due date, you do not qualify for tax amnesty. So, for example, if you knew you needed to file taxes as an American living in Dubai, but never looked into it when taxes were due, your failure to file would be considered willful. In this case, you would not be able to file under the Streamlined Procedure. And you would be on the hook for any penalties accrued.
However, if you moved abroad in 2021 and did not realize Americans living outside of the US needed to file US taxes, your conduct would be considered non-willful and you might qualify for the Streamlined Procedure.
How long should your certification statement be?
When writing your personal certification statement, it can be tempting to write pages to include all of the relevant contexts. However, all the IRS is looking for here are the individual factors that prevented you from filing your tax return or paying your taxes on time.
While including all relevant information is important, be concise, when possible. You should reread your statement a couple of times to edit it and pare it down, if needed. You’ll also confirm all the information is accurate.
Partnering with an experienced CPA from Bright!Tax can help you develop a polished, well-formatted certification letter that can improve your chances of receiving amnesty through the Streamlined Procedure.
Should you consider the Streamlined Procedure?
If you have past-due tax returns you haven’t filed and you’re an American citizen living abroad, the Streamlined Procedure is worth considering. As long as you did not file due to ignorance of the requirement, this filing procedure can help you avoid penalties.
In fact, if you qualify, the IRS will waive all tax penalties you might otherwise face for the specified filing years. So, if you did not file your 2019, 2020 and 2021 taxes because you were unaware expats had to file US taxes and you qualify for the Streamlined Procedure, you would not owe the IRS penalty fees for 2019, 2020 and 2021. You would, however, still have to pay any taxes you owe the US Government.
Bright!Tax Can Help you File Form 14653
Navigating the Streamlined Procedure can be tricky. Especially since you have multiple tax returns and possibly some FBARs to file. Completing Form 14653 and fine-tuning your certification statement can also feel overwhelming.
Bright!Tax has nailed down the easiest way to help you complete the Streamlined Procedure. We also make sure Form 14653 is accurate and complete. Our simple four-step process makes it easy for you to get organized and stay involved throughout the process.
First, you’ll register and connect with your Bright!Tax CPA. Then, we’ll let you know which tax documents to upload to our secure Client Organizer. After that, an experienced CPA will prepare your US expat tax returns. Finally, we’ll send you a draft of your tax returns to review and approve. After approval, you’ll receive your final files to print, sign, and mail into the IRS. (Unfortunately, eFiling isn’t available with the Streamlined Procedure!)
Connect with Bright!Tax today to get started and to stop worrying about IRS penalties.