As a US citizen regardless of if you are in the country to not or paying taxes to another country, you need to file your US taxes while you are overseas.
After neglecting my US tax obligations for years while in New Zealand before we left New Zealand and hit the road I knew I had to take my head out of the sand and get it sorted.
I had been in New Zealand for over 5 years without filing. Luckily there is a process for Americans in this situation – the Streamlined Process so I’m guessing it’s not uncommon. It doesn’t come cheap but it allows you to catch up with your US tax filings without facing any penalties nor any undue scrutiny by the IRS.
How much does it cost?
I’m sure it’s possible to do it yourself and save some coin but I chose to have an accountant do it which set me back $1,276 for the Streamlined Process plus the current years return.
Wondering if you qualify for the Streamlines Process?
To qualify for this amnesty program you must
- File your last 3 federal tax returns
- File your last 6 FBARS (Foreign Bank Account Reports), required in years when you had over $10,000 in foreign accounts
- Pay any taxes due (often nil, once you claim one or more expat exclusions)
- Self-certify that your previous failure to file was non-willful (conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.
How does it work?
I filled out a quick form online at BrightTax! and scheduled a call with my assigned CPA to give them the lowdown on my situation, they confirmed I’d be eligible for the process and once I paid the 30% deposit (balance due on filing) we got underway.
I had to supply information for the past 5 years including:
- Employer name and address
- Dates of employment
- Taxes paid
- Deductions and expenses
I was a little bamboozled at first and reminded why I had put this off for so long but eventually figured out it was actually pretty simple and I could get all of my records from the NZ Tax service IRD and I was away laughing.
I happened to submit return during peak tax season in the states so it took close to six weeks for BrightTax! to complete but off-peak you’re looking at only 2 – 4 weeks to wrap it all up.
I was relieved to find out I didn’t own anything to IRS, phew!
What happens next?
The completed Streamlined paperwork needed to be mailed to the IRS in Austin, Texas. Being in Sayulita, Mexico where there is no post office and in the middle of a pandemic, this was the most difficult part. We ordered a DHL to collect the package for $33 on a 3-day delivery service. The next day we received a call from a lost driver, he couldn’t find our casa and didn’t speak English so we had fun trying to direct him to our location. Once he arrived we handed over the envelope and the waybill and he asked for some pesos, umm but we paid online? We showed him the receipt and whipped out Google translate to explain we’d already paid but he insisted that it hadn’t been. The transaction was showing as pending on our bank statement (in transit between our account and DHL’s) so we gave the driver the benefit of the doubt and paid, again to send the taxes to the IRS.
We’ve contacted DHL twice and not even an acknowledgment of the email so we aren’t holding our breath to get that money back.