Tax Tip Tuesday: Behind on U.S. Taxes Abroad? The IRS Might Forgive You

If you’re a U.S. citizen or green card holder living overseas and haven’t filed U.S. tax returns in a while, don’t panic—there may be a way to catch up without facing penalties. The IRS recognizes that many Americans living abroad simply didn’t realize they were still required to file annual tax returns and report foreign financial accounts. That’s why they created the Streamlined Foreign Offshore Procedures, a program designed to help non-willful taxpayers get back into compliance—without the crushing penalties that usually come with delinquent filings.

To qualify for the Streamlined Foreign Offshore Procedures (SFOP), you must meet several conditions. First, you must have lived outside the United States for at least 330 full days during one of the last three tax years. Second, your failure to file tax returns or FBARs must be considered “non-willful”—meaning you didn’t know you were supposed to file and weren’t deliberately trying to avoid your obligations. You also must not be currently under IRS examination or criminal investigation.

If you qualify, the filing requirements under SFOP are fairly straightforward. You must submit three years of tax returns—either late or amended—to include all previously unreported foreign income, along with six years of Foreign Bank Account Reports (FBARs) for any non-U.S. accounts that exceeded $10,000 in aggregate at any point during the year. You’ll also need to include Form 14653, a certification statement explaining in your own words why you failed to file and affirming that it was non-willful.

The real benefit of this program? The IRS waives all late-filing foreign items and FBAR penalties. That could save you thousands—or even tens of thousands—of dollars. However, it’s important to note that any taxes owed still need to be paid, along with interest. Still, this is one of the most taxpayer-friendly resolution paths available for those living abroad who didn’t realize they were out of compliance.

This program has been available since 2014, but the IRS has signaled that it could end at any time. Once it’s gone, taxpayers may be left with only traditional disclosure programs or face audits and penalties. If you’ve received letters from your foreign bank about IRS reporting or FATCA compliance, now is the time to act.

If you're unsure whether your situation meets the non-willful standard, it’s essential to speak with a tax professional experienced in international matters. The IRS reviews each certification closely, and mistakes or vague explanations can trigger audits or worse.

In short, if you’ve been living abroad, missed past tax filings, and didn’t know you were supposed to file, the IRS may be willing to forgive the oversight—but only if you take the first step. Streamlined relief could offer a clean slate and peace of mind, so don’t wait to explore your options. Reach out to us at may.sung@mkhstaxgroup.com.