# Mechanics of paying back-taxes to IRS



## LiverpoolFan

Hello, I really want to pay back four years of back-taxes to the IRS, but I am not sure of the actual mechanics? The IRS site is not really helping. They discuss the New-Streamlined Filing Compliance Procedures for Non-Resident Non-Filer US Taxpayers.

So should I do the Streamlined System, or is there some sort of "back-tax" office I can send them too.

Basically I have lived abroad in Lebanon and Syria for 6 years and for 4 of those I have had income (far, far less than the 90k exclusion limit). I just owe the filings, but not any tax. 

Could I send the old 1040s and 2555 EZs straight to the IRS, or do I need to do the streamline program, or some sort of other? The actual forms I can figure out quite easily (except for the fact I have no W-2s). But where to file is really confusing me.

Thanks for any help!


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## BBCWatcher

All the instructions you should need are here.


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## Bevdeforges

Just file the back taxes. If you don't owe anything, they'll just accept them and you can get on with your life. You don't need to enter any kind of "compliance program" - people have been getting right with the IRS like this for YEARS!

Penalties for late filing are based on a percentage of what you owe - and the IRS will get in touch if you wind up owing anything over and above whatever you send in with your filings. But if you owe nothing, then there ARE no penalties or interest.

Like the Nike ads says, "just do it."
Cheers,
Bev


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## LiverpoolFan

Cool! Thanks Bevdeforges!  Basically I can't even do the compliance program since I cannot fill out a FBAR form (I have less than 10k in a foreign bank for all of these years). 

As an added question I am still in a quandry over the actual mechanics of sending them. I am assuming there is no specific office for sending back taxes from abroad, so I guess I will go ahead and send it to whatever office accepts normal back taxes.




Bevdeforges said:


> Just file the back taxes. If you don't owe anything, they'll just accept them and you can get on with your life. You don't need to enter any kind of "compliance program" - people have been getting right with the IRS like this for YEARS!
> 
> Penalties for late filing are based on a percentage of what you owe - and the IRS will get in touch if you wind up owing anything over and above whatever you send in with your filings. But if you owe nothing, then there ARE no penalties or interest.
> 
> Like the Nike ads says, "just do it."
> Cheers,
> Bev


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## BBCWatcher

Did you even read those instructions?  They tell you exactly what mailing address to use and how to specially mark your forms. Item #4 tells you exactly what to do about FBARs. I'll quote the first part:

"Submit complete and accurate delinquent FBARs for the last six years for which an FBAR is due."

So if you had less than $10K total in foreign financial accounts in 2006, 2007, 2008, 2009, 2010, and 2011 then FBARs were not due for those years, so they're not due now.

I suggest reading the instructions linked above and then posting specific follow-up questions if you have any.


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## Bevdeforges

LiverpoolFan said:


> As an added question I am still in a quandry over the actual mechanics of sending them. I am assuming there is no specific office for sending back taxes from abroad, so I guess I will go ahead and send it to whatever office accepts normal back taxes.


Check Publication 54 for the years in question. For a while, all tax returns from "overseas" went to one address, but a year or two ago they changed the address. The Pub 54s for the relevant years will give you the address for each year.
Cheers,
Bev


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## maz57

@ liverpool. The US government would have you believe that moving abroad is a crime, but in fact, it's not. It's also not a crime if you don't understand inscrutable IRS rules and regulations. Most normal people with a life don't. Forget the IRS programs...go with Bev's advice. If you will owe no tax, file the last three or four years showing $o balance owing and move on. When I did exactly that a while back I filed only the current year FBAR as well. The only response I ever got from the IRS was a check for $300! (Bush rebate or something like that).

Entering any of their programs is only for people who have been up to something; i.e. not paying their taxes. You would be essentially admitting wrong-doing and are asking for their forgiveness. Entering the streamlined program will guarantee that the process will drag on for a very long time-possibly years. 

Your facts as you have stated them only indicate a failure to file returns which would have yielded no tax anyway. Just file 'em and get on with your life. If it makes you feel better enclose a letter explaining that now that you get it you'll be on time with future filings. Even the IRS will be happy because it will require no further resources on their part!


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## BBCWatcher

I do NOT like that advice.

There is a published, enforceable penalty for late filing, even if you owe zero taxes. The IRS has also published a program and instructions that provide for the waiver of late filing penalties -- see the link above. Follow their instructions exactly. If you get "cute" _that's_ when you increase your risk of penalties.

This is really not complicated.


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## maz57

Right you are BBC. The IRS has a fine or penalty for all infractions, real or imagined. They are published. The ultimate purpose is to encourage compliance. Once that goal is accomplished, what further action is necessary? They save the heavy ammunition for cases where the IRS discovers the infraction, particularly if there is evidence of wilful non-compliance, not when the individual has come forward themselves. 

What Bev is suggesting and I have done recently is known as a "quiet" disclosure. Somewhere in the IRS web site they caution against such filings, saying that it may expose a taxpayer to this or that penalty. On the other hand, "streamlined" is IRS-speak for "long and protracted". It's a "procedure". That means examiners, findings of fact, letters back and forth, more documentation needed, so on and so forth. The quiet disclosure only requires some clerk somewhere to have quick look and determine there is no subterfuge and more importantly no revenue to be collected without considerable investment in IRS resources. Then it goes on the done pile and the clerk is on to the next case. Nothing "cute" about it. It's what they want.

@Liverpool --- I should mention I'm not a lawyer or an accountant. I don't have a horse in this race. I'm only telling you what worked just fine for me. Bev has posted a great deal of useful information on this thread. Study it and use her real world experience to your benefit. If, however, there are more complicating factors that you have not mentioned, then other options may have to be considered.


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## maz57

Took me awhile to find it but check this out: http://www.irs.gov/uac/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S.


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## maz57

And now I see that the link doesn't work. The IRS making compliance easier I guess.
Basically an official IRS fact sheet (Dec. 2011) saying what we have have been discussing.


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## Vangrrl

Try this link:

Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers


I also did a quiet disclosure back in 2011 but that was before these rules were clarified. It was pretty much the same as what this "noisy" disclosure requires, except instead of filling out the questionnaire, I just wrote a letter explaining why I hadn't filled tax returns and tacked it to the front of the stack of papers. Ditto for the FBARs.


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## Bevdeforges

maz57 said:


> Took me awhile to find it but check this out: http://www.irs.gov/uac/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S.


You must have found that page just as they were changing it - the link now gives an error. It's possibly because the IRS is in the process of updating their information for the new tax filing season. Will check back later to see if they've restored the page.
Cheers,
Bev


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## BBCWatcher

I posted the correct link as the very first reply to LiverpoolFan.


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## maz57

I see the Fact Sheet I was referring to is now linked in the third paragraph of the "streamlined procedure". The trouble with the streamlined procedure (aside from the fact that it lists a whole lot of conditions wherein you can't use it) is the questionnaire that must accompany the submission. 

By filling out this questionnaire one is voluntarily giving the IRS way more facts than they need to know. Someone will, of course, look at that questionnaire and make a determination of the level of risk. The IRS has not even defined what the criteria are and is being very vague about the whole process. In effect, the IRS is asking the taxpayer to supply the rope with which they might very well hang him. 

Why anyone would consider putting themselves in this position is beyond me but I readily admit that I have a considerable distrust of the US government and the IRS in particular. I compare it to driving up to the US border and answering the questions the guy in the booth is asking. Do you give short replies or do you try to tell him your life story? One can never know what bit of information may set 'em off on a witch hunt so the less one gives up voluntarily the better.


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## BBCWatcher

maz57 said:


> Why anyone would consider putting themselves in this position is beyond me but I readily admit that I have a considerable distrust of the US government and the IRS in particular.


I think the problem is that you're already in that position if you haven't filed. You're already legally liable for late filing penalties if you don't file. Bridge crossed.

Also, I think word would quickly spread if the IRS's amnesty programs (such as this one) weren't conducted in good faith in the vast majority of cases. After all, it's in the IRS's own self interest that its amnesty programs be known as credible. It's also in the IRS's self interest to encourage voluntary compliance -- and, conversely, to throw the book at individuals who they have to pursue.

Moreover, frequently the case that the expiration of an amnesty program signals the start of more vigorous enforcement in a particular compliance area. As many wealthy individuals with Swiss bank accounts can attest.


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## maz57

Quote:
"Also, I think word would quickly spread if the IRS's amnesty programs (such as this one) weren't conducted in good faith in the vast majority of cases. After all, it's in the IRS's own self interest that its amnesty programs be known as credible." 

The IRS already has a credibility problem due to previous amnesty programs and the word did spread quickly. That's why so many who entered them decided to opt out. Those who did opt out are now in a state of limbo, much like one would be if they entered the latest streamlined procedure. I think part of the problem was the previous programs were designed for wealthy tax evaders who lived in the US but moved money offshore to secret Swiss accounts, etc. Those who actually lived overseas and were ordinary working blokes (and owed little to no taxes because of the FEIE and FTC) did not belong in those previous programs. Meanwhile, those who filed quiet disclosures, were obviously low risk, and owed little to nothing are done.

As far as I can tell, this one is open ended, but curiously, they are very specific about which years the taxpayer has to not have filed. If you are outside that window then no dice. In the IRS's defence, they are tasked with implementing stupid tax policy; Congress gets to decide what that policy is and they change it at their whim. But still, there is no doubt that the IRS is dangerous to any living organism; the less attention one draws to oneself the better.


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## BBCWatcher

OK, but "less attention" typically does not mean not filing when you're legally required to file.

I don't see how the streamlined program can be viewed as anything other than a step in the right direction. If it didn't exist then the IRS would only have two options: ad hoc discretionary relief or full penalties. With this program the IRS has a third option: _standardized_ discretionary relief. It's still discretionary, but "streamlined" also refers to the IRS and its approval process.

If you're making an argument why someone shouldn't file at all when legally required to file, that's a very separate discussion. But if you're going to file, and you're delinquent, wouldn't it make sense to take advantage of standardized discretionary relief if you qualify? That's what the streamlined program is for.

Said another way, I do not recommend getting "cute" with an organization that holds absolute power over your penalties. There are no guarantees -- the legal liability is always there until cleared, and there's nothing you can do about that. But "don't be a jerk," basically, and the IRS will _generally_ reciprocate in kind.

Said yet another way, when you appear in a courtroom before a judge, should you wear neat business attire, bathe, remove your hat, stand straight when the judge enters and leaves, sit straight, pay attention, listen closely to the judge, never interrupt, address the judge with appropriate deference, never swear, maintain composure, and so on? Or should you violate one or more of the rules of behavior the judge has established in her courtroom? I would choose to be on my best behavior. The judge might still give me the maximum penalty, but I'm much more likely to have a happier outcome if I follow the judge's rules.


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## Bevdeforges

To be honest about it, the current "streamlined" program is nothing more than precisely how the IRS have operated for years with regard to overseas taxpayers who haven't been filing. Those in the "low risk" category (i.e. those who owe nothing other than the filing itself) have little or nothing to fear.

The one factor that may be different is that of location, location, location (as the old saying goes). The IRS seems to have been mounting something of a scare offensive in the Canadian media these last couple of years, particularly when it comes to the FBAR and FATCA filings. But it may or may not result in any noticeable increase in enforcement action - particularly amongst the "low risk" group of taxpayers.

It seems strange that the IRS doesn't maintain any sort of offices in Canada if they are planning some sort of enhanced enforcement efforts there. But I guess we'll have to wait and see what develops.
Cheers,
Bev


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## maz57

Anyone notice that Liverpool Fan seems to have left the building? Probably bolted with glazed over eyes and hands over his ears! I hope whatever he decides works out well for him. 

@ Bev. Yes, there has been a media onslaught since about June 2011; to the point that one has to wonder if some well-known Canadian media personalities aren't on IRS retainer. I know that's a ridiculous assertion but certain reporters have been all too willing to convey the IRS's message of threats and intimidation. I guess it worked because that's how I found out. After living in Canada for some forty years the summer of 2011 was when I discovered I was supposed to have been filing US returns all along. Up to that point there was no way I could have known about these crazy filing requirements and none of my USC friends did either. (Except for going to the IRS website; why would anyone with a life would ever do that if you don't live in the US?) The whole citizenship-based tax thing is so bizarre that no could ever imagine such a thing in their wildest dreams.

@ BBC. I would never argue that someone should not file at all; whether we like it or not as US citizens it is our legal obligation. The only question is how best to go about meeting that obligation after finding out about it years after the fact. I filed three years back returns "quietly" and so did many people I know. To date I haven't heard of anyone having any difficulty. As far as standing in front of a judge goes, you can bet I'd be on my best behavior! 

Come to think of it, I did stand before a judge recently. (Wore a suit.) The occasion was my swearing in as a new Canadian citizen after having lived happily in Canada for forty years. If I hadn't found out about these ridiculous US rules I would still be "coasting" along with Permanent Resident status. So now the 2012 tax return will be my last ever US tax return. I can thank the IRS for "clarifying " my thinking. In the fullness of time I expect the US will reform their unwieldy tax code and cease to be on outlier among the developed nations of the world by getting rid of citizenship-based taxation. It's a quaint relic of the Civil War period and in the modern era is causing untold damage to their economy and reputation. It probably won't happen in our lifetimes; it's not my problem anymore.


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