IRS streamlined filing procedures
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Missed US tax filings? Find the right path back!
If you’ve fallen behind on US tax returns or foreign account reporting, the IRS Streamlined Filing Compliance Procedures offer a practical route to get compliant, and to avoid severe penalties, as long as the oversight was non-willful.
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Gareth Lambe, Tax Director, Wilson Partners
What are IRS streamlined filing procedures?
The IRS Streamlined Filing Compliance Procedures are a formal program designed to help US taxpayers who have failed to file US tax returns or report foreign financial accounts, where that failure was non-willful, meaning it resulted from genuine oversight, misunderstanding, or lack of awareness, rather than deliberate evasion.
The program was introduced by the IRS in 2012 and significantly expanded in 2014. It remains one of the most important and widely used routes available to US expats and dual nationals seeking to regularise their tax affairs without facing the full weight of standard IRS penalty provisions.
The United States taxes its citizens and permanent residents (green card holders) on their worldwide income, regardless of where they live. This means that a US citizen living in the UK, or anywhere else in the world is still legally required to file a US federal tax return each year if their income exceeds the filing threshold — even if they are also filing and paying tax in their country of residence.
In addition to income tax returns, US persons with financial accounts held outside the United States are required to file an annual Foreign Bank Account Report (FBAR) if the aggregate maximum values of those accounts exceed $10,000 at any point during the year. This is a separate filing from the tax return itself, submitted to the Financial Crimes Enforcement Network (FinCEN) rather than the IRS.
Many Americans abroad are simply unaware of these obligations. They may have lived outside the US for years or decades, paying all their taxes locally, without realising that a US filing requirement also exists. The Streamlined Procedures were specifically created to help these individuals come back into compliance. We commonly hear from ‘accidental’ Americans who unknowingly have US citizenship and only discover their obligations later in life.
Non-willful conduct means that the failure to file was due to negligence, inadvertence, or mistake, or was the result of a good-faith misunderstanding of the law. It is distinct from wilful non-compliance, which involves a conscious decision not to meet a known obligation.
The IRS requires taxpayers using the Streamlined Procedures to certify, under penalty of perjury, that their conduct was non-willful. This is a formal legal statement and should not be made without proper advice. Wilson Partners will assess your circumstances carefully before any certification is submitted.
The program is available to:
- US citizens living outside the United States
- US permanent residents (Green Card holders) living outside the United States
- Dual nationals who hold US citizenship alongside another nationality
- US residents who have unreported foreign financial assets or income
In each case, the individual must be able to certify that their failure to file was non-willful and must not be under audit or examination by the IRS at the time of submission.
For the regular streamlined version of the program participants are required to file:
- Three years of delinquent or amended US federal income tax returns (Form 1040)
- Six years of delinquent or amended Foreign Bank Account Reports (FBARs)
- A signed non-willful conduct certification
- Payment of any tax due, plus interest
All relevant international information returns must also be included. For example, Form 5471 for interests in foreign companies, or Form 3520 for foreign trusts or gifts.
Choosing the right route
Two versions of the Streamlined program exist. The appropriate path depends on where you are currently tax resident. We will confirm which applies to your circumstances during your initial consultation and review.
What penalties apply?
Two versions of the Streamlined program exist. The appropriate path depends on where you are currently tax resident. We will confirm which applies to your circumstances during your initial consultation and review.
One of the key benefits of the Streamlined Procedures is the significant reduction in penalties compared to standard IRS enforcement. The outcome depends on which route is used:
Streamlined Foreign Offshore Procedures (SFOP)
For individuals who are not US tax residents, typically US citizens or Green Card holders living abroad. This route provides the strongest available penalty relief. For eligible non-residents, the program effectively allows catch-up filing with no financial penalty beyond the tax and interest owed. The majority of our clients fall into this category as individuals residing outside the US.
- No miscellaneous offshore penalty
- Three years of amended or delinquent US tax returns (Form 1040)
- Six years of Foreign Bank Account Reports (FBARs)
- Must satisfy the IRS non-residency requirement (not present in the US for more than 35 days in at least one of the three covered tax years)
- Non-willful conduct certification required
Streamlined Domestic Offshore Procedures (SDOP)
For individuals who are US tax resident but have unreported foreign financial assets or income.
- A 5% miscellaneous offshore penalty applies, calculated on the highest aggregate balance of unreported foreign financial assets across the covered period
- Three years of amended US tax returns
- Six years of FBAR filings
- Still substantially more favourable than standard IRS penalty rates
Standard failure-to-file and failure-to-pay penalties are also waived for participants in both programs.
Why act promptly?
The Streamlined Filing Procedures are not guaranteed to remain available indefinitely. The IRS has modified them before and can do so again. Submitting whilst the program is open, and before any IRS inquiry or audit begins, is essential. Once the IRS contacts a taxpayer about their non-compliance, the option to use the streamlined route is closed.
There are also practical reasons to regularise sooner rather than later. US tax compliance is increasingly required to open certain bank accounts; complete investment transactions and the risks of non-compliance are more pronounced in an era of shared financial information across borders. Unresolved non-compliance can also complicate estate planning, property transactions, and business activities. Having non-compliance overhanging you whilst dealing with significant life events such as an inheritance from the US can be an added stress at a difficult time.
Standard IRS penalties for unreported foreign accounts can run to tens of thousands of dollars. The streamlined route can reduce these to zero for offshore filers.
How Wilson Partners can support you
We will assess your eligibility, calculate your aggregate liability across the relevant years, prepare all required returns and filings, and liaise with the IRS on your behalf, giving you a clear picture of your position before any submission is made.
Our team handles the full complexity of the process, coordinating directly with the IRS and giving you confidence that your obligations are being met professionally.
Preparation and submission of three years of amended or delinquent US tax returns (Form 1040), including review of all income, credits, and foreign exclusions.
Filing up to six years of Foreign Bank Account Reports (FBARs), a common source of significant penalty exposure for US persons abroad.
Review of applicable foreign tax credits and tax treaty provisions to mitigate double taxation and reduce your overall liability where possible.
Assistance with the completion of the required IRS certification confirming non-willful conduct, a critical component of a valid streamlined submission.
Relief for certain former citizens
In 2019, the IRS introduced a separate and distinct program, the Relief Procedures for Certain Former Citizens, to assist US citizens renouncing their citizenship who have been non-willful in their non-compliance with their US tax obligations at the time of doing so, typically because they were unaware of them.
The expatriation tax problem
When a US citizen renounces their citizenship, they are required to certify that they have been fully tax-compliant for the five years immediately before the date of expatriation. If they cannot make this certification, they may be treated as a “covered expatriate” under Section 877A of the Internal Revenue Code.
Being classified as a covered expatriate triggers a deemed disposal of all worldwide assets on the date of expatriation, the so-called ‘exit tax’, which can result in substantial and unexpected tax liabilities, even where no assets have actually been sold. The Relief Procedures for Certain Former Citizens were introduced specifically to provide a route out of this position for those with relatively modest tax affairs.
To be eligible, an individual must meet all of the following conditions:
- They relinquished their US citizenship on or after 3 March 2016
- They have a net worth of less than $2 million at the time of expatriation
- Their aggregate net US federal income tax liability for the year of expatriation and the five preceding tax years is $25,000 or less in total
- They have not previously filed Form 8854 (the Initial and Annual Expatriation Statement)
- They were not compliant with their US tax obligations prior to expatriation
Eligible individuals must submit:
- Five years of delinquent or amended US federal income tax returns (Forms 1040 or 1040NR)
- Six years of delinquent FBARs (FinCEN Form 114) are recommended
- Form 8854, the Initial and Annual Expatriation Statement
- Any other required international information returns (e.g. Form 5471, Form 3520)
If the IRS accepts the submission, the individual is not treated as a covered expatriate. This means:
- No exit tax on the deemed disposal of worldwide assets
- The tax from the filed tax returns does not need to be paid
- No FBAR penalties for the years covered
- No failure-to-file or failure-to-pay penalties for the covered years
- The individual is treated as having been compliant for the purposes of the expatriation rules
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