A Deep Dive Into Form 14653

Living outside the United States while still a citizen can be challenging, as you still have legal obligations and requirements you must fulfill with the U.S. government. It’s easy to fall behind on tax filings and other legal obligations, and in fact, many people don’t even realize they have these obligations until they have lived abroad for years. Luckily, the IRS understands that errors resulting from non-willful conduct are common and don’t warrant the same consequences as errors caused by intentional and fraudulent misconduct. Form 14653, or Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, is one form you’ll need to fill out to catch up with past filings and become compliant with IRS requirements.  Learn more about this form and how to fill it out, and when you’re ready to discuss your issue with a tax pro, call Timothy S. Hart Law Group at 518-213-3445.

Understanding Form 14653

Form 14653 takes the monumental task of figuring out your past-due U.S. taxes and condenses it into one form. You’ll need to indicate that you are providing your delinquent or amended tax returns for the previous three years. The form includes space to detail the amount of tax owed for each year, as well as space for calculating interest. Filling out this form is your certification that your errors were not intentional or willful and that any filing errors or delays were the result of ignorance or negligence, not malice.

Avoidance of Penalties

The most significant benefit of the Streamlined Foreign Offshore Procedures is the ability to avoid heavy penalties. If you comply with the SFOP and are eligible to use these procedures, you will not be subject to failure-to pay or failure-to-file penalties. You will also be safe from accuracy-related penalties, FBAR penalties, and information return penalties. This is true even if any of the tax returns disclosed as part of the SFOP are pulled for auditing.

Eligibility Criteria

Not all U.S. persons qualify for relief under Form 14653 and the Streamlined Foreign Offshore Procedures. Eligible filers must meet non-residency requirements. You meet this requirement if, during the previous three years during which you failed to file your taxes on time, you did not have a U.S. abode and were not in the country for 330 full days. Individuals who are not citizens or lawful permanent residents meet this requirement if they do not meet the substantial presence test set forth by the Internal Revenue Code. The other main requirement is that your failure to file or pay taxes must have been non-willful. This is generally the case, as people often don’t even know they are supposed to keep filing tax returns after moving outside the country. People in this situation do qualify for SFOP. However, people who willfully fail to file or pay taxes cannot use these procedures. This includes those who do not report their income or file taxes because they know they will owe a substantial amount to the U.S. government.

Required Information and Documentation

Form 14653 itself is very short—just three pages long. However, in addition to the form itself, you’ll need to provide quite a bit of supporting documentation and paperwork. First, you have to include your tax returns for the three most recent years. You must also include the required information returns, regardless of whether or not they would have been filed separately if they had been filed on time. If you’re amending your taxes because you realized your tax returns were inaccurate, you will submit Form 1040X for each of the returns. On the first page of each tax return, write “Streamlined Foreign Offshore” in red to show the IRS that these returns are submitted under the SFOP. You’ll also need to write a statement for Form 14653. This statement must include the following elements:

• Certification that you are eligible for the Streamlined Foreign Offshore Procedures
• Certification that your required FBARs have been filed
• Certification that all of the failure to file, unreported income, or late information returns are the result of non-willful conduct

It must also include your reasoning for your failure to report. Give specific facts regarding your circumstances, how you came to know that you are required to file, and proof that you took action to remedy the situation as soon as possible. This statement must be attached to each tax return, but not the FBARs. Without including the statement, your returns will be filed as if they were not part of the SFOP. You must also submit payment for each tax return, with interest calculated. If your calculations are off, you will either receive a bill or a refund in the mail. The FBAR is a big part of the SFOP. While you only need three years of tax returns, you need six years of FBARs. FBARs must be filed electronically via the FinCEN BSA E-Filing System, and you must mark that your reason for filing late is “Streamlined Filing Compliance Procedures.” Information to Include in Your Narrative Statement of Facts The narrative statement of facts should include all necessary information without going overboard. Per the IRS, you should include:

• Personal background and financial background
• Why you failed to report income/file tax returns and file FBARs
• Source of funds in your foreign financial accounts
• Explain your contact with your foreign accounts or assets, including withdrawals and deposits

Step-to-Step Guide to Filling Out Form 14653

The majority of the work that goes into Form 14653 isn’t the form itself; it’s all of the required information and documentation that you have to submit along with the form. Completing these steps will help you gather the necessary information and avoid unnecessary delays:

1. File your last three years of tax returns, calculating your taxes due.
2. Submit your last six years of FBARs.
3. Write your statement including the three elements listed above and your explanation for your late filing. You can include this statement in Form 14653 and then attach copies of it to each of your tax returns.
4. Fill out Form 14653. You’ll include your identifying information, tax information for the previous three years, your residency status, and signature.

Common Mistakes and How to Avoid Them

Filers often make simple mistakes on their Form 14653 that lead to their request being denied. You can avoid making these mistakes by working with a tax attorney with extensive experience in offshore compliance procedures and ex-pat needs.

• Overexplaining yourself: The statement that you include with Form 14653 should explain why you failed to file or pay your taxes and include all necessary information. However, some filers go way too far, including unnecessary details and information that actually makes their non-compliance appear willful. It’s important to state the facts in a concise manner and avoid including extraneous information.
• Assuming you meet the foreign residency requirement: The offshore requirements for the SFOP is very specific, depending on whether you are a U.S. citizen, resident, or non-resident. If you don’t know the definition of an abode per the IRS or how many days you were in the U.S. for each of the past three years, you may run afoul of this requirement and put in all of the SFOP work without even qualifying.
• Miscalculating interest: This doesn’t necessarily lead to refusal of your forms, but it can lead to a higher-than-expected bill if you underpay.
• Not submitting the necessary reporting forms: U.S. persons with offshore assets and accounts often have to file a long list of extra tax forms and information returns in order to remain compliant with IRS requirements. Failing to file these forms can complicate your Streamlined Foreign Offshore Procedures filing and leave you, once again, unintentionally non-compliant.

Submitting Form 14653

One unique aspect of Form 14653 is the IRS’s requirement that it, along with all of its supporting documentation, must be filed in paper form. Electronic submissions are not accepted. This requirement excludes the FBAR, which must be filed electronically and cannot be filed in paper form except under extreme circumstances. Form 14653 and the supporting documentation described above can be sent to the following address: Internal Revenue Service 3651 South I-H 35 Stop 6063 AUSC Attn: Streamlined Foreign Offshore Austin, TX 78741 When you file your taxes and FBARs in the future, you will use standard filing procedures. You only submit this way and to this address for your delinquent paperwork.

After Submission: What to Expect

When you start a Streamlined Foreign Offshore Procedures file, the process may take much longer than other tax cases do. While some forms and returns are processed immediately, SFOP files can remain open for years while the IRS processes and analyzes them. The IRS can even request additional information and documentation if you are missing forms or failed to include necessary information. You should keep an eye out for any potential communication from the IRS, as failure to respond to their inquiries will likely lead to your file being audited and eventually being rejected entirely. Of course, this doesn’t mean that your paperwork will take years to process. The IRS aims to process these files as quickly as possible, but they do not guarantee a specific timeline. You can keep up with the process of your returns and other forms by checking your online account on the IRS website. Your account will include information on your recently filed tax returns and any notices sent by the IRS.

Frequently Asked Questions

Who needs to file Form 14653 and when?

Form 14653 is required for U.S. persons living abroad who have not filed necessary tax returns or information returns. This form is for people who have not reported income from a foreign asset and/or may have failed to file an FBAR. In order for a filer’s non-compliance to be considered non-willful, they must strive to repair it as soon as they find out about it—and that means filing right away.

How does Form 14653 relate to the Foreign Account Tax Compliance Act (FATCA?)

The Foreign Account Tax Compliance Act requires you to report on your foreign assets if you are a U.S. person. You must submit annual reports and pay associated taxes on income from these assets. Form 14653, as your declaration of non-willfulness, allows you to catch up on FATCA filing requirements and avoid penalties.

Can Form 14653 be filed electronically?

Form 14653 cannot be filed electronically. The IRS only accepts paper submissions.

What happens if I make a mistake on Form 14653?

This is surprisingly common, due to the amount of documentation and calculations required when submitting Form 14653. If you make an error and realize it after submitting, you should amend any affected documents (such as tax returns or FBARs with mistakes) and then submit an amended Form 14653. When you do this, you should include a statement indicating the original mistake and how you took steps to correct it.

What happens if I don’t file Form 14653?

If you do not file Form 14653 and just submit your delinquent tax returns and information returns, you will not have access to the benefits of the Streamlined Foreign Offshore Protocols, such as exclusion from penalties. You may also be hit with heavier penalties for your violations, as you aren’t granted amnesty without submitting all necessary forms and paperwork.

Do I have to pay fees to file Form 14653?

Generally, there are no fees associated with the Streamlined Foreign Offshore Procedures or Form 14653.

Can my delinquent tax returns be audited? Will I automatically be audited?

Anything you submit as part of your SFOP can be audited; filing for amnesty does not protect you from audits. However, if any of these returns are audited, the IRS will not assess failure-to-pay penalties, failure-to-file penalties, accuracy-related penalties, or information return penalties related to the disclosures made on your Form 14653. You will not automatically be audited simply because you submitted SFOP paperwork.

How is Form 14653 different from other foreign reporting forms?

Form 14653 is essentially an umbrella form that sums up and includes all delinquent foreign reporting forms, such as the FBAR. You still need to file your other required foreign reporting forms, but Form 14653 allows you to request amnesty for your failure to file those forms on time.

Resources for Further Assistance

We understand that getting caught up with unpaid taxes, unfiled tax returns, and unfiled information returns can be overwhelming—especially when you’re overseas and unable to communicate with the IRS directly during normal business hours. Luckily, the IRS does provide a number of resources to help taxpayers explore their options when it comes to compliance:

•  Guide to Form 14653, including information on marking documents appropriately
•  FBAR filing information
•  Streamlined Filing Compliance Procedures FAQ

Living abroad does not exempt you from U.S. tax return filing and information return filing requirements. However, being delinquent on these filings doesn’t automatically mean heavy penalties. With the Streamlined Foreign Offshore Procedures, you can request amnesty, get caught up, and remain compliant going forward. This is a fairly complex procedure, and working with an experienced tax attorney can save you a lot of stress and time. Find out how we can help and set up a consultation; just call Timothy S. Hart Law Group at 518-213-3445 or reach out online.