Streamlined Filing-A Way to Catch Up

It is hard to imagine for people who have lived in the U.S. all their lives, but there are people who are U.S. citizens but don’t realize it. A person can be a U.S. citizen because they were born in the U.S.; or if one or both of their parents were born in the U.S. and their parents met certain residency requirements.

I have met people who didn’t realize that because their parents met these U.S. residency requirements it affects their personal citizenship status. I have even met people who did not realize that because they were born in the U.S. they are U.S. citizens. For example, the only reason they were born in the U.S. was because the closest hospital was across the border!

Why this is important is that the U.S. is one of the only countries in the world which taxes based upon citizenship, not residency. Most countries tax on residency. If you are a resident and/or you have income which is sourced (earned) in that country, then you have to file a tax return.

The U.S. is the exception in that the U.S. requires their citizens to file a tax return if they meet the filing requirements no matter where they live.

The IRS is becoming more aggressive in trying to get U.S. citizens worldwide to file their tax returns. One of the ways that the IRS is encouraging filing is called the Streamlined Filing Compliance Procedure.[1]

Without Streamlined Filing, a U.S. person who has not filed for 20 years (and met the U.S. filing requirements for all 20 years) would technically be required to file 20 years of tax returns.

If the taxpayer is eligible for Streamlined Filing, they will file 3 years of U.S. tax returns and 6 years of FBARS (Foreign Bank Account Reporting).[2]

These requirements reduce the onerous filing requirements inflicted on U.S. citizens or other U.S. taxpayers living in a foreign country who did not realize they need to file U.S. tax returns.

Are you a U.S. taxpayer who needs help in catching up on your tax returns? Please contact CPA WorldTax for help and support at taxinfo@cpaworldtaxllc.com.

[1] https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures [accessed Nov 4 2016].

[2] https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar [accessed Nov 4 2016].

FBARs will be covered in a future article.