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U.S. Expats: How to Handle Delinquent Expat Tax Returns
U.S. Taxpayers, who have not filed U.S. tax returns each year, are considered delinquent and can face potential civil and criminal penalties from the Internal Revenue Service (IRS).
U.S. citizens and residents living abroad are still required to annually file a U.S. tax return and pay taxes on their worldwide income.
An example is an individual who was born in the U.S. and whose parents immigrated (or returned) to Mexico. That person is a U.S. citizen and is required to file a U.S. tax return, even if he never sets foot in the United States again.
Penalties arise from a failure to file a return in a timely manner and/or failure to file a Foreign Bank Account Report (FBAR) via Form TDF 90-22 (required if at any time during the year the balance in your foreign bank account was $10,000 or more).
It’s also important for U.S. expats to understand the relatively new FATCA law. Under this law, foreign banks will now be required to provide the IRS with information regarding financial accounts held by U.S. citizens. This means that U.S. expats who have not been filing tax returns and/or reporting foreign bank accounts are at an increased risk of being audited by the IRS.
Penalties arise from a failure to file a return in a timely manner and/or failure to file a Foreign Bank Account Report (FBAR) via Form TDF 90-22 (required if at any time during the year the balance in your foreign bank account was $10,000 or more).
It’s also important for U.S. expats to understand the relatively new FATCA law. Under this law, foreign banks will now be required to provide the IRS with information regarding financial accounts held by U.S. citizens. This means that U.S. expats who have not been filing tax returns and/or reporting foreign bank accounts are at an increased risk of being audited by the IRS.
Options to Avoid Severe Financial Penalties and Criminal Prosecution
The option a taxpayer is given to handle delinquent tax returns will determined by the circumstances that led to the tax return delinquency. Some delinquent tax payers may qualify for a waiver of some (or all) of the penalties. The most common options:
Offshore Voluntary Disclosure Program (OVDP)
U.S. expats with foreign accounts or entities have the option to disclose the accounts so that they can become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution.
The IRS considers a voluntary disclosure occurs when the communication is truthful, timely, complete, and when:
- The taxpayer shows willingness to cooperate (and does in fact cooperate) in determining his or her correct tax liability.
- The taxpayer makes good faith arrangements with the IRS to pay in full, the tax, interest, and any penalties determined by the IRS.
Is it is important to note that if the IRS is conducting an audit or examination, the taxpayer will not have the option to
participate in the OVDP.
According to the IRS:
Taxpayers with undisclosed foreign accounts or entities should make a voluntary disclosure because it enables them to become compliant, avoid substantial civil penalties and generally eliminate the risk of criminal prosecution. Making a voluntary disclosure also provides the opportunity to calculate, with a reasonable degree of certainty, the total cost of resolving all offshore tax issues. Taxpayers who do not submit a voluntary disclosure run the risk of detection by the IRS and the imposition of substantial penalties, including the fraud penalty and foreign information return penalties, and an increased risk of criminal prosecution.
Reasonable Cause Defense
Reasonable cause defense can be used if the taxpayer can prove any of the following situations:
- Taxpayer has limited education.
- Whether the taxpayer received prior penalties.
- Recent changes in the tax forms (or law) that could not reasonably be expected to be known by the taxpayer.
- The complexity of the tax or compliance issue.
Other situations may be apply that can allow a taxpayer to use the reasonable cause defense. Consulting with a U.S. tax attorney can help the individual decide which option he or she qualifies for and will help resolve the tax issues with the least amount of financial penalties and avoid criminal prosecution.
Hear from relieved
Taxpayers who trusted Verni Tax Law Around the World
Anthony was creative in helping me resolve some past issues in a way that they never became a problem so that is greatly appreciated and I feel confident I can now enjoy my retirement with peace of mind. Thanks for that.
Ken B.
Cebu City, Philippines
I came to Anthony Verni with FBAR issues. I was not sure what to expect and felt that I was going to be put in a difficult position financially as well as legally. My fears were unfounded and I was very satisfied with his professionalism and the outcome of my case.
Douglas R.
Osaka, Japan
Anthony’s help with Swift & Secure Systems Inc., CheckWare Workstations LLC and my personal taxes have been of great value. Since moving to Florida (and my Connecticut Accountant retiring) I have tried various other methods of keeping the accounting and taxes under control.
Phil Y
President, Swift & Secure Systems Inc., Boynton Beach, FL
I would like to thank Anthony N. Verni. Mr. Verni has successfully represented us before the Internal Revenue Service. We had foreign bank accounts that we inadvertently didn’t report and we were subject to steep penalties. As a result his efforts, the FBAR penalties were waived by the IRS.
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Yassin and Eva, B.
Farmington Hills, Michigan
EXPAT solution for delayed US tax / FBAR issues
Anthony Verni helped us to file our delayed IRS tax returns and FBAR issues in a very professional way. We are very thankful for his help and guidance thru this nightmare of rules and are highly recommending his service.
Andrea
IRS FBAR and OVDI compliance representation expertise
As a long-term ex-pat US citizen living in Europe, I was surprised several years ago by an polite invitation from the IRS, via email, to consider filing FBARs, along with updated income tax returns. Although (or because) I am a university academic with specialization in comparative labor law, I quick…
Charles
Sound advice. High caliber work.
One of those people who were born by chance in the USA but never lived or worked there, in 2015 , I had no choice but to file returns with the IRS. For this purpose, fortunately, I found Mr Verni on the internet and entrusted him with the complex process involved in using the Streamlined Foreign Offs..Read more
Carlos
EXPAT solution for delayed US tax / FBAR issues
Anthony Verni helped us to file our delayed IRS tax returns and FBAR issues in a very professional way. We are very thankful for his help and guidance thru this nightmare of rules and are highly recommending his service.
Andrea
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Beside his inbepth knowledge of the law, Anthony will setup weekend appointments to accommodate his clients. I really appreciate that because otherwise I would have had to miss time, thus money from work.
Elder
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anonymous
Tax issues
Anthony Verni helped us resolve our tax issues. He guided us through the whole process and took care of the filings. He is extremely courteous and reassuring. He also explains the options available and advises what he thinks you should do.
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I have known and have had the pleasure of having Anthony Verni representing me on several projects over the last 20 years. I have always found him to be conscientious and diligent in working within my time restraints and goals. He has been dedicated and responsive in providing me with the the legal r..Read more
Frank Pirol
Offshore voluntary disclosure issues
Mr. Anthony Verni, your expertise and professionalism in handling my offshore voluntary disclosure case far exceeded my expectations. Thank you and appreciate for providing guidance, support and presenting the facts of my case. I simply could not have been more pleased with the process and outcome. ..Read more
Vikram Patel
The expat’s solution to US tax problems
I met Anthony after comparing advice and quotes from 5 different expat tax experts, all based in the U.S. I had an initial free telephone consult with Anthony about my issues with non-filing of Fbars for my foreign accounts investments. The other attorneys I contacted had advised me that the onl..Read more
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