# Offshore Streamlined Filing Compliance



## Amerikiwi21 (Mar 20, 2021)

Right, this may be a silly clarification, but I’ve been pouring over tax forms for too many hours and I think my brain is a touch fried.
File the last 3 years; okay, check. Now, should I be filing 2020 as a current and separate up-to-date submission online, and sending off 2017, 2018 and 2019 in paper for streamlined processing...
OR 
Do I include 2020 in the streamlined processing, thereby making the paper submission 2018, 2019 and 2020?
I’m leaning toward the prior, but I just need some logical input here.
I’m clear on which forms (1040, plus 14653 and 2555). 
And I suppose same question relative to the FBAR- last 6 years, so I file ‘16, 17’, 18’, 19’, and 2020? Or 15-19? In this case it seems I should be filing 16’-20’.
Help a taxed (ha, pun) brain out here, please!
Thanks.


----------



## Bevdeforges (Nov 16, 2007)

It's the first option: you file the current year (i.e. 2020) and three prior years (2017, 2018 and 2019). 

The FBAR is perhaps a bit less critical (as they don't really do much more than file those away) - but I'd go with the current year plus 6 years prior too, just for consistency's sake.


----------



## Amerikiwi21 (Mar 20, 2021)

Thank you!! That’s what seemed correct, but I appreciate the input. 🙂
Quick edit- are you saying file 2020 as part of the streamlined process, or as per the regular online filing for current year?


----------



## Bevdeforges (Nov 16, 2007)

Technically speaking, you're filing the 2020 return on time so what most folks I know have done is to file that first and then do the back filings as the streamlined compliance part.


----------



## Amerikiwi21 (Mar 20, 2021)

I’ve just realized I have another (likely silly) question-
My foreign tax year in NZ runs from April 1- March 31. The US tax year runs according to the calendar year, Jan 1- Dec 31.
When reporting income, should I be looking at what I earned according to my foreign tax year (April-March), OR go in and report income to US tax year (Jan-Dec)?
Either us completely doable, just want to clarify!
Thanks


----------



## Moulard (Feb 3, 2017)

With very few and limited exceptions individuals are required to file their US returns using the US tax year 1 Jan - 31 Dec.


----------



## Bevdeforges (Nov 16, 2007)

Ideally you should report your income for the relevant tax year to the relevant tax authority. For US tax purposes, you adjust your NZ tax year income to conform to the US calendar year. 

For 2020, you subtract your Jan. 1 2021 through March 31 2021 income from whatever tax year statement you get in NZ and then add on your income from Jan. 1 2020 to March 31, 2020 to get the calendar year to report to the US. (Another reason to keep your payslips as you receive them! <g>)


----------



## eminam777 (Apr 8, 2021)

Hello - Hope I may jump in with a question about the streamlined process. 

My past year's filings are fine. It is only the 5471 that is missing. What does it mean when the Streamlined instructions say that I need to amend the prior year returns? Do I just print out the old returns and add 5471?
Btw, have you heard of the requirement that the tax calculations need to also be filed starting from 2019 even if no tax is due? (GILTY)
So, is the way to do it to use online software (TaxAct) and then print them off and mail them following the IRS instructions.

Would be great to compare notes.

Thank you


----------



## 255 (Sep 8, 2018)

eminam777 -- You file an amended return by filing IRS form 1040-X. Form 1040-X (Rev. January 2020) (irs.gov) You only record items that you change from your original submission and include an explanation of why you are filing in Part III of the form. You would also include any revised schedules/forms you are changing (or adding.)

Yes, I have heard that the GILTI calculations need to be filed annually, whether any tax is due or not.
Form 8992 (Rev. December 2020) (irs.gov) Form 8993 (Rev. December 2020) (irs.gov) To date, I've avoided investing in CFCs -- so I have no relevant experience to share. Sorry.

I have no experience online filing either. The one time I tried, the program I used did not like me, as a foreign filer -- so I gave up and went back to my old method, using the free IRS fillable forms and mailing them to the respective IRS office. Maybe someone else will chime in with some real world success, but most of the posts, of U.S. expats, trying to file online, seem to delineate problems. Of course, I'm sure that those that were successful probably didn't bother to post. I am confident that "professional" programs (that tax preparers use,) would support your needs (but would be cost prohibitive for a one off submission.) There are tax preparation firms that will review your work and make an online submission, for a nominal fee. Cheers, 255

P.S. If your "past years filings are fine," you do not need the streamlined procedure. Just file1040-Xs to correct your errors (failure to file 5471, or whatever,) for the past three years.


----------



## eminam777 (Apr 8, 2021)

255 said:


> P.S. If your "past years filings are fine," you do not need the streamlined procedure. Just file1040-Xs to correct your errors (failure to file 5471, or whatever,) for the past three years.


Oh wow. that is probably the most useful advice. The accountants that I used before tell me that I need to do the Streamlined Process to avoid penalties when all I have to do is re-file the last 3 years and include the missing 5471 forms. This sounds like a more reasonable approach since nothing else has changed and I can back file 3 years..

Just shows that the accountants don't know any better themselves..

The accountants also tell me that I need to submit GILTY calculations but another Tax person told me that it only applies to big corporations and not to individuals with small businesses. If I need to submit and pay GILTY tax, then every person with a small business who makes any profit is liable for this tax which is scary..


----------



## Moulard (Feb 3, 2017)

I believe that the final regulations on GILTI do provide some relief for small business owners, if you make a s.962 election you can deduct 50% of GILTI income before applying 80% foreign tax credit for the taxes paid by your business. So whether you will owe US tax on it will depend in part on the tax rates where the business is established.

Beyond that, there are challenges to both the Transition Tax and GILTI provisions of the TCJA currently working its way through the court system centred on the fact that the regulatory assessment of the act violated rules that require an assessement of the impact on small businesses be undertaken. Google Monte Silver for info on both of his challenges.

Personally I would be hesitant to simply late file a Form 5471 via an amended return. Its one of the forms that IRS has a track record of AUTOMATICALLY imposing a fine of $10k for being filed late. 
Yes you can simply attach a Reasonable Cause statement along with the amended return, but are you confident that the IRS would actually be reasonable in determining if your cause was reasonable?
I probably would not, or at least not without solid advice on how to draft that statement. I gather there are two primary ways to avoid those penalties, one is the Streamlined Foreign Offshore Procedure and the other is the Delinquent International Information Return Submission Procedure -- which is probably why it was suggested by your accountant.


----------



## eminam777 (Apr 8, 2021)

Moulard said:


> I believe that the final regulations on GILTI do provide some relief for small business owners, if you make a s.962 election you can deduct 50% of GILTI income before applying 80% foreign tax credit for the taxes paid by your business. So whether you will owe US tax on it will depend in part on the tax rates where the business is established.
> 
> Beyond that, there are challenges to both the Transition Tax and GILTI provisions of the TCJA currently working its way through the court system centred on the fact that the regulatory assessment of the act violated rules that require an assessement of the impact on small businesses be undertaken. Google Monte Silver for info on both of his challenges.


I don't owe any GILTY tax because I've had 3 years of losses but what stresses me is that an accountant said I still had to submit the calculations/reporting and it may be complex and presumably he was pitching for me to hire him to do this reporting on my losses. 

Another tax person said that the Gilty doesn't apply to me and only applies to big multinational corporations. So I am waiting to get confirmation on whether I need to report it in an amended/streamlined return..FYI I went to www.justanswer.com and consulted an expert..I find their advice to be good and affordable.



Moulard said:


> Personally I would be hesitant to simply late file a Form 5471 via an amended return. Its one of the forms that IRS has a track record of AUTOMATICALLY imposing a fine of $10k for being filed late.
> Yes you can simply attach a Reasonable Cause statement along with the amended return, but are you confident that the IRS would actually be reasonable in determining if your cause was reasonable?
> I probably would not, or at least not without solid advice on how to draft that statement. I gather there are two primary ways to avoid those penalties, one is the Streamlined Foreign Offshore Procedure and the other is the Delinquent International Information Return Submission Procedure -- which is probably why it was suggested by your accountant.


Yes I am now trying to decide between using the streamlined process or quiet disclosure (ie. filing amended returns with the missing 5471 forms). The way I think of it is that technically you are allowed to amend up to 3 years if you discovered an error and if you discovered an error and fixed it then it should not be an issue, particularly if I didn't owe any tax to begin it. 

I am reluctant to use the streamlined procedure since it is a one-time deal, just in case I make more errors in the future and need to use streamlined to right future wrongs, especially when I start making money..


----------

