Are you an American expat who owes money to the IRS ? Or are you thinking of avoiding US tax debt by moving abroad? If so, beware! The IRS won’t leave you without taking your money. That’s because the U.S. has tax treaties with more than 42 countries where foreign tax agencies and the IRS share tax information about their residents.
If you stay outside America, you are still liable to pay your country’s expatriate tax. Whether you have income or not, you must file a US tax return every year.
STREAMLINED FILING PROCEDURES: A LIFESAVER FOR US TAXPAYERS
Are you behind your taxes on US expats? Yes? Then don’t worry. The IRS has created a program called Streamlined Filing Procedures that you can use to pay your U.S. expatriate taxes. This program was established in 2012 to help US taxpayers living abroad repay US taxes owed abroad.
There is good news for all expats from the USA . After updating this program, the IRS waives all late filing and FBAR penalties for US taxpayers residing outside the country.
Now, let’s see…
HOW TO FILE TAXES THROUGH STREAMLINED FILING PROCEDURES
Once you qualify for Streamlined Filing Procedures, you should review the steps you need to take as part of this program:
- You must file the last 3 years of US tax returns, even if you did not file or filed an incorrect tax return.
- You must write the words “Exempted Foreign Offshore” in red ink at the top of each page to indicate that you are filing under this program.
- To prove that your tax evasion was inadvertent and to prove your eligibility for the program, you must “complete and sign a certification statement by a US person residing outside the US.” If you do not do this, you won’t receive the benefits of the program.
- Include your tax ID number on your check when you file your tax or interest payments.
- Submit an application to receive an ITIN with your return if you do not have a Social Security number.
- Last but not least, you should gather all the required financial documents along with your payments and send them to the IRS in paper form, not electronically.
Now that you know how to file your taxes while living abroad, let’s take a look at some tips you can use to settle your IRS tax debt.
Straight from the IRS: Tips to Get Rid of Tax Debt
Want to get out of debt fast? Don’t worry! The IRS offers the following tips for paying off tax debts:
PAY YOUR TAX BILL
Pay your taxes as soon as you receive your bill from the IRS. If you can’t pay the entire amount at once, take out a loan and pay the bill in full. At the same time, you will save money on fines and interest for late payments. Remember, the IRS charges a late fee of 0.5% each month the tax bill remains unpaid (it increases each month until it reaches 25% of the total tax owed) and 3% per year on back taxes, penalties and interest.
USE THE IRS DIRECT PAYMENT TOOL
According to the IRS, the IRS Direct Pay tool is the best way to pay your taxes. You can pay taxes freely and securely from your savings or checking accounts. You will receive instant payment confirmation. With this tool you can pay your taxes online. You can easily find this tool on the IRS website.
TAKE A SHORT-TERM EXTENSION TO PAY
Can you pay all taxes within 120 days ? If so, you may qualify for a short-term payment extension from the IRS. To do this, you can call the IRS at 1-800-829-1040 or request a short-term extension online using the Online Payment Agreement (OPA). Plus, you don’t have to pay an extra fee for a short-term renewal.
CHOOSE A MONTHLY PAYMENT
If you can’t pay your IRS fees in full, you can apply for an installment plan. If you owe $50,000 or less, you may qualify for an installment agreement with the IRS. According to the IRS, a direct debit payment plan is an inexpensive and hassle-free way to pay your taxes. In addition, the setup fee is also lower than other payment plans.
CHOOSE AN OFFER IN COMPROMISE (OIC)
If you want to settle your tax debt for less than the full amount and get out of debt quickly, consider applying for an Offer in Compromise ( OIP ) with the IRS. This option is best if you have a huge tax debt. You can use the IRS Prequalification tool to check if you are eligible for an OIC.
So, here’s what you need to know about paying off your tax debts, even if you’re out of the country.