How to Catch Up on Multiple Years of Unfiled Expat Tax Returns

Falling Behind Is More Common Than Many Expats Realize

Some Americans move overseas without realizing that U.S. tax filing obligations generally continue. U.S. citizens and resident aliens abroad are usually subject to filing rules based on income, age, and filing status, much like taxpayers living in the United States.

Others know they need to file but become overwhelmed by foreign income documents, unfamiliar retirement accounts, currency conversion, or foreign bank reporting. The longer the delay continues, the harder it can feel to begin.

The good news is that there may be established ways to correct past noncompliance.

Start by Identifying the Missing Years

Before preparing returns, determine:

• Which federal returns were not filed
• Whether state returns were required
• Whether foreign income was omitted
• Whether FBARs were required
• Whether Form 8938 or other international forms applied
• Whether the IRS has already contacted you

Do not assume every taxpayer should file the same number of past returns. The appropriate approach depends on the facts and whether the failure was willful or non-willful.

Streamlined Foreign Offshore Procedures

The IRS Streamlined Foreign Offshore Procedures may be available to eligible taxpayers living outside the United States whose failure to report income, foreign assets, or tax was non-willful. The streamlined procedures generally require the most recent three delinquent or amended federal income tax returns and six years of delinquent FBARs, when required.

Participants must provide a certification explaining that the failure resulted from non-willful conduct. Eligibility should be reviewed carefully before making any submission.

FBAR Catch-Up May Require a Different Procedure

An FBAR may be required when the aggregate value of foreign financial accounts exceeds the applicable threshold at any time during the calendar year. FBAR obligations are separate from the income tax return, and Form 8938 does not replace the FBAR.

The IRS also provides delinquent FBAR submission procedures for certain taxpayers who properly reported and paid tax on the income from their foreign accounts but failed to file the FBAR.

Choosing the wrong correction method can create unnecessary complications, so taxpayers should not automatically file several late forms without reviewing the available options.

Gather the Right Records

Useful documents may include:

• Prior U.S. tax returns
• Foreign wage and tax statements
• Bank and investment statements
• Pension and retirement account records
• Business income and expense reports
• Housing and travel records
• Foreign tax payment confirmations
• Account balances needed for FBAR reporting

Currency conversion should be consistent and supported by appropriate records.

Do Not Wait for an IRS Notice

The IRS offers several options for addressing undisclosed foreign financial assets and past filing failures. The correct option depends on whether the conduct was willful, whether tax is owed, and whether the IRS has already started an examination.

Taking voluntary action before receiving a notice may provide more options and reduce stress.

Get Back on Track With Professional Help

Catching up can involve federal returns, state filings, FBARs, Form 8938, foreign pensions, business interests, and other international forms. Expatriate Tax Returns helps late filers and non-filers organize prior years and choose an appropriate compliance path.