If you’ve been living in The Netherlands and haven’t filed your U.S. taxes in a while, you’re not alone. Dealing with the IRS can feel intimidating, but we help clients get caught up every day—with minimal hassle and often penalty-free!
While the IRS offers the Streamlined Offshore Compliance Procedure for taxpayers who have fallen behind unintentionally, not everyone qualifies for this program. So, what can you do if you don’t meet the criteria? That’s where our customized Late-Filing Catch-Up Package comes in, providing a tailored solution to help you become compliant without unnecessary stress or penalties.
What Is the Streamlined Offshore Compliance Procedure?
The Streamlined Offshore Compliance Procedure is a special program designed by the IRS for U.S. taxpayers who have failed to file their tax returns or report foreign financial assets but can certify that their failure was non-willful. This procedure allows eligible taxpayers to catch up on their filing obligations while avoiding some of the severe penalties associated with late or non-filing.
To qualify for the Streamlined Offshore Procedure, you must meet the following criteria:
- Non-Willfulness: Your failure to file was not intentional. You didn’t deliberately avoid your tax responsibilities; rather, your oversight was due to negligence, misunderstanding, or an honest mistake.
- Foreign Residency: You must meet the non-residency requirement, generally having lived outside the U.S. for at least 330 full days in one of the past three years.
- Not Under Examination: You cannot be under any current IRS investigations or audits.
By filing under this procedure, you can submit your past-due tax returns and FBARs (Foreign Bank Account Reports) without facing significant penalties. It’s an excellent option for many expats who unintentionally fell behind on their U.S. tax obligations.
What If You Don’t Qualify for the Streamlined Offshore Compliance Procedure?
There are several reasons you might not qualify for the Streamlined Procedure:
- Willfulness
If you’ve previously filed U.S. tax returns as an expat, it may be challenging to claim non-willfulness. The IRS might interpret your failure to file additional returns as intentional.
- Lack of Missing International Forms
The Streamlined Procedure is particularly beneficial for those who have complex international filing requirements. If you’re a regular employee abroad without additional investment income or foreign corporations, you might not be missing the international forms that this procedure addresses.
- Time Spent in the U.S.
You must have lived outside the U.S. for at least 330 full days in one of the past three years. If you don’t meet this residency requirement, you won’t qualify.
Even if you don’t owe any tax due to the Foreign Earned Income Exclusion (FEIE) or foreign tax credits, you’re still required to file your U.S. tax returns when you meet the filing threshold. For those who are married filing separately, a common status for so-called “lovepats” or those married to non-U.S. citizens, that threshold is just $5 of income!
Failing to qualify for the Streamlined Procedures doesn’t leave you without options—you can still get caught up, and we can help you do it efficiently and effectively.
Our Customized Late-Filing Catch-Up Package: Your Best Solution
At BNC Tax , we’ve developed a Late-Filing Catch-Up Package specifically designed for individuals who don’t qualify for the Streamlined Procedure. Here’s why our package might be the best option for you:
- Penalty Mitigation: In cases where you owe no tax, it’s likely no penalties will apply. We work diligently to minimize any potential penalties and can assist in requesting penalty abatement if necessary.
- Comprehensive Filing: We prepare the past three years of tax returns and six years of FBARs (Foreign Bank Account Reports), which typically ensures you’re fully compliant with IRS requirements. While any previous years remain statutorily open, the IRS will not generally go back further than 3 years unless there is an indication of tax liability or criminal wrong doing. The IRS considers this catch-up package to be compliant.
- Transparent Pricing: Our fees are based on the complexity of your returns (per year of filing) and are published on our website. There are no surprises at the end of the filing. Beyond just filing the returns, we help you plan for the future, offering insights that can lead to significant tax savings in the long run.
Benefits of Getting Caught Up
When we talk to potential clients with unfiled past tax returns, it is always about the same thing: WORRY. By catching up on your old tax returns, you can say goodbye to those nagging fears about unresolved tax issues.
Have you ever wondered, “Am I allowed to travel back to the U.S. with unresolved tax debt or unfiled returns?”
While most late tax filers can travel without risk, if you owe more than $50,000 your passport will be confiscated upon renewal or U.S. entry.
Have you considered, “Does the IRS actually owe ME money?”
You may have worked or had other income in the U.S. and been subject to withholdings which you were owed as a refund.
Have you thought, “What will the IRS do if they find me?”
The IRS is generally more lenient with taxpayers who come forward voluntarily before they initiate any contact. Delaying can increase the risk of penalties and complications. The statute of limitations also does not begin until you file your return.
Why Acting Now Matters (2024 edition)
Economic Impact Payments, otherwise known as “Stimulus Checks” can only be claimed by filing tax returns. The 2020 stimulus payments were last eligible to be claimed on May 17th 2024 so if you didn’t claim it, time has run out.
The 2021 stimulus payments must be claimed by April 15th, 2025. This can be as much as $1,400 per eligible person or dependent. For a family of two parents and two kids, you may be missing out on $4,200.
In the 2021 tax year, the American Rescue Plan increased the amount of the Child Tax Credit from $2,000 to $3,600 for qualifying children under age 6, and $3,000 for other qualifying children under age 18. While you must have lived in the U.S. at least half the year to be eligible for the increased amount, the credit is fully refundable which could result in an additional $7,200 for a family with two children under 6 in 2021.
A few other reasons to get caught up now include:
- Changing political landscape could risk a change in the IRS focus on taxpayers abroad.
- The IRS has historically been lenient on late filers, including full penalty waiver for late FBARs under the Delinquent FBAR Submission Procedures. There is no guarantee the IRS will continue this program into the future.
- If you do owe tax, you cannot waive the interest imputed on the balance. Interest rates with the IRS in 2024 are as high as 8%. Filing now can stop the bleeding.
Understanding the Risks of Not Filing
It’s important to recognize that certain international forms carry significant penalties for non-compliance. For U.S. expats, some of the most severe penalties, up to $10,000 per form per year, are linked to failing to file these forms:
- Form 8858 “Information Return of U.S. Persons with Respect to Foreign Disregarded Entities and Foreign Branches”
- Applies to all persons operating foreign self-employed businesses (even freelancers or contractors) and those who own foreign rental property.
- Form 8938 “Statement of Specified Foreign Financial Assets”
- You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or
- You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year.
- Form 5471 “Information Return of U.S. Persons With Respect to Certain Foreign Corporations”
- Applies to shareholders of foreign corporations including the Dutch “Besloten Vennootschap” (B.V.) including those on the Dutch American Friendship Treaty as B.V. shareholders.
- Form 3520 “Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts”
- Applies to those who hold some foreign pensions, including self-directed pensions in The Netherlands
- Applies to those who receive gifts from non-U.S. persons of more than $100,000 per year
Maximize Acceptance Chances
Using a professional tax service like BNC Tax can help articulate any reasonable cause for late filing, enhancing the likelihood of penalty abatement.
We boast a 100% acceptance rate on all the Streamline packages we have filed since 2012. We will only put our clients in the program if we are sure you qualify.
For those who don’t qualify or those who don’t benefit, we will get you back on track with our custom Late Filing Catch Up Package, with the least risk of exorbitant penalties.
Don’t let unfiled tax returns hang over your head any longer. Whether you qualify for the Streamlined Procedure or not, we have solutions to help you get back on track. Reach out to our team of tax professionals and let’s navigate this journey together. You’ve got this!