Filing back tax returns can be a demanding as well as time-consuming task for many US taxpayers. Moreover, American ex-pats living abroad face even more challenges since many Americans residing overseas have to file the FBAR and other complex overseas tax forms as a part of US expatriate tax returns. One of the options to become compliant is to participate in the IRS streamlined program for American expats. This program has become effective on September 1, 2012 and more expats have become compliant through this program. Another option is the Offshore Voluntary Disclosure Program. Earlier we discussed What is Voluntary Disclosure Program.
This is an email from one of our clients, US citizens, American expats living abroad and green card holders. “I am an American expat in Singapore. I have filed US expatriate tax returns since 2003. How can I file back tax returns? How many years of back taxes am I required to file?
Let’s review key issues in regards to filing back tax returns.
1. Collect all tax documents. US citizens and green card holders have to search for past W-2, 1099 and other statements supporting any deductions or credits to claim on US expatriate tax returns.
2. Find previous tax returns. US taxpayers also should find the last tax return for any carryover issues.
- American expats can request a copy of your tax return directly from the IRS by completing the form 4506, Request for Copy of Tax Return. There is usually a $57 (in 2013) fee for a copy. Back tax returns with forms 1040, 1040A and 1040EZ are available within 7 years from the date that a tax return was filed.
- Another option is to request a transcript from the IRS by completing the form 4506-T, Request for Transcript of Tax Return. The transcript is usually available for the current year and 3 preceding years. It takes up to 45 days for the IRS to process the request.
3. Prior year IRS tax forms. US taxpayers must download the corresponding version of US tax forms to file correctly US expatriate tax returns. American expats should seek help of CPA that specializes in US taxes for expats. Or, they have to visit the IRS website for any forms.
4. Prepare back tax returns. One of the challenges that US taxpayers face is that they have to use the instructions for a corresponding tax year. American expats face even more challenges due the multiple IRS updates in regards to FBAR, FATCA, controlled foreign corporations, PFICs, foreign trust and other overseas tax issues. For example, the FATCA form 8938 has to be filed starting with a tax year 2011. The IRS updated the PFIC form effective in a tax year 2012. The IRS issued a ruling in regards to foreign trust Fideicomiso in 2013.
5. Years of back tax returns. Most US taxpayers have to file past due tax returns for 6 years. American expats face special rules to file US expatriate tax returns if they decide to go through the IRS streamlined program for Nonresidents. For example, American expatriates must file 3 years of back tax returns and 6 years of FBAR if they are eligible to participate in the streamlined program. US expats must file the most recent eight tax years of US expatriate tax returns with a past due return date to go through the OVDP.
6. Submit tax returns. US expatriate tax returns must be submitted to the address per the instructions in the tax forms. There is a special mailing address for the streamlined program and Offshore Voluntary Disclosure Program.
Conclusion
US citizens, green card holders and American expats living overseas must take actions as soon as they realize that they are required to file US tax returns. US taxpayers must remember that any interest or penalties start to accumulate from the due date of a tax return. Moreover, a failure to file the FBARs can result not only in civil penalties but also the criminal prosecution. American expats must seek help of the expat tax CPA that specializes in US taxes for expats. International tax experts at Artio Partners are here to help you.