What are the options available to a US citizen living abroad who has never filed FATCA, FinCEN or Tax returns.

A U.S. citizen living abroad who has never filed for IRS income tax returns, FATCA reporting, and FinCEN FBAR reports still has compliance options available. The right approach depends on their history (intentional vs non-willful non-filing) and their financial thresholds. Here’s a breakdown:

1. Filing Obligations While Living Abroad

Even abroad, U.S. citizens are required to:

• File annual IRS Form 1040 (U.S. income tax return), reporting worldwide income.
• File FATCA Form 8938 (Statement of Specified Foreign Financial Assets) if thresholds are met.
• File FinCEN Form 114 (FBAR) to report foreign bank accounts if thresholds are met.

2. Compliance Thresholds

FBAR (FinCEN Form 114)

• Must be filed if the aggregate value of all foreign financial accounts exceeds $10,000 USD at any point during the year.
• Includes checking, savings, investment accounts, and even accounts where you only have signature authority.

FATCA (Form 8938)

Thresholds vary based on filing status and residency:

• Living Abroad:
  • Single / MFS: >$200,000 USD at year-end OR >$300,000 USD at any point in the year.
  • Married Filing Jointly: >$400,000 USD at year-end OR >$600,000 USD at any point.
• Living in the U.S.:
  • Single / MFS: >$50,000 USD at year-end OR >$75,000 USD at any point.
  • Married Filing Jointly: >$100,000 USD at year-end OR >$150,000 USD at any point.

Tax Return (Form 1040)

• Filing thresholds are similar to U.S. residents, based on gross income and filing status (e.g., about $14,600 for singles under 65 in 2024).
• The Foreign Earned Income Exclusion (FEIE – Form 2555) and Foreign Tax Credit (Form 1116) often reduce or eliminate U.S. tax due, but the return must still be filed.

3. Options for Getting Compliant

If you’ve never filed, you have these structured IRS options:

(a) Streamlined Foreign Offshore Procedures

• For taxpayers abroad who failed to file non-willfully.
• Requires:
  • Last 3 years of tax returns,
  • Last 6 years of FBARs,
  • A signed statement of non-willful conduct.
• No penalties for FBAR/FATCA non-filing if accepted.

(b) Delinquent FBAR / International Information Return Procedures

• If you owe no U.S. tax, the IRS may allow late FBAR or FATCA forms without penalty.
• Must provide a reasonable cause statement.

(c) Voluntary Disclosure Program (VDP)

• For taxpayers with willful noncompliance or risk of criminal exposure.
• More complex and costly (involves penalties and potential negotiations).

(d) Quiet Disclosure (not recommended)

• Simply filing late without entering a program.
• Risky, as the IRS may view it as an attempt to avoid penalties, leading to harsher treatment.

4. Penalties for Non-Filing

• FBAR: $10,000 per non-willful violation; up to 50% of account balance per year if willful.
• FATCA: $10,000 failure-to-file penalty, escalating with continued failure.
• Tax Returns: Failure-to-file and failure-to-pay penalties plus interest.

Best option for most expats: If non-filing was non-willful, the Streamlined Foreign Offshore Procedures usually provides the cleanest path to compliance with minimal penalties.

Step-by-Step Compliance Checklist for U.S. Expats

1. Confirm Your Status & Intent

• Verify you are a U.S. citizen or green card holder.
• Confirm that non-filing was non-willful (i.e., due to misunderstanding or oversight, not deliberate).
• Check whether you’ve been living abroad (physical presence or bona fide residence tests).

2. Gather Financial & Tax Records

• Bank and investment account statements for the last 6 years (needed for FBAR).
• Income records for the last 3 tax years (salary, self-employment, rental, pensions, etc.).
• Foreign pension, KiwiSaver, superannuation, PFIC/PIE fund information (if in NZ/AU).
• Mortgage, property, and other financial records.
• Foreign tax returns and proof of taxes paid locally.

3. Determine Filing Requirements

• Tax Returns (Form 1040): Last 3 years required under Streamlined.
• FBAR (FinCEN Form 114): Last 6 years if >$10,000 aggregate in foreign accounts.
• FATCA (Form 8938): If above thresholds (see earlier).
• Other Information Returns (if applicable):
  • Form 3520/3520-A (foreign trusts, some KiwiSaver/super funds).
  • Form 5471 (foreign corporations).
  • Form 8621 (PFICs, e.g. NZ PIEs, AU managed funds).

4. Prepare the Filings

• Tax Returns (3 years):
  • Report all worldwide income.
  • Claim Foreign Earned Income Exclusion (Form 2555) and/or Foreign Tax Credit (Form 1116) to reduce/eliminate U.S. tax liability.
• FBAR (6 years): File online via FinCEN’s BSA E-Filing system.
• FATCA (Form 8938): Attach to tax returns if thresholds met.
• Other international forms if required.

5. Write the Non-Willful Certification

• Required statement signed under penalties of perjury.
• Explains that failure to file was due to negligence, oversight, or lack of knowledge — not willful evasion.
• Must be persuasive and credible.

6. Submit Under Streamlined Foreign Offshore Procedures

• Mail tax returns + Form 14653 (Certification by U.S. Person Residing Outside of the U.S.) to the IRS.
• File FBARs electronically for six years through FinCEN’s system.
• No separate FATCA submission — Form 8938 is part of the tax return.

7. Post-Submission Follow-Up

• Keep proof of filing and FBAR confirmation emails.
• Watch for IRS correspondence (audit or acceptance).
• Once compliant, continue to file annually to avoid future issues.

8. Risks & Penalties If Not Addressed

• FBAR penalties up to $10,000 per non-willful violation.
• FATCA penalties starting at $10,000 per missed form.
• Failure-to-file penalties and interest on unpaid tax.
• Streamlined program waives penalties if accepted.

 

Quick Snapshot – What You’ll File

Form	How Many Years?	Who Files It?
Form 1040 (Tax Return)	3	All U.S. citizens/GC holders
FBAR (FinCEN 114)	6	Anyone with >$10k foreign accounts
Form 8938 (FATCA)	3	If assets above thresholds
Form 2555/1116	3	To reduce U.S. tax
Form 3520/5471/8621 (if required)	3	For trusts, corps, PFICs