For many taxpayers, receiving a stimulus payment from the IRS has been a vital financial lifeline during uncertain times. However, for individuals living abroad or with complex international tax situations, accessing these payments can be challenging. Fortunately, the IRS has created an amnesty procedure for people living outside the United States to claim their economic stimulus payments, even if they haven’t filed a U.S. tax return in recent years. These are called the Streamlined Offshore Filing Procedures, and they provide a way for eligible individuals to bring their tax filings up to date without facing the steep penalties that typically come with non-compliance.
In this blog, we will explore how you can use the Streamlined Offshore Filing Procedures to claim your IRS stimulus payment, what these procedures entail, and who can benefit from them.
What Are the Streamlined Offshore Filing Procedures?
The IRS’ Streamlined Offshore Filing Procedures were designed for U.S. citizens and permanent residents living outside of the United States who have not been in full compliance with their U.S. tax filing obligations. These procedures are intended to help taxpayers who have failed to file U.S. tax returns or report foreign bank accounts due to non-willful negligence, and it offers a way to get back into good standing with the IRS without facing harsh penalties.
The Streamlined Procedures allow eligible taxpayers to bring their tax filings up to date by filing their tax returns for the past three years and their Foreign Bank Account Reports (FBARs) for the past six years. This program provides significant relief in the form of penalty reductions, which can be a game-changer for taxpayers who might otherwise be overwhelmed by the financial burden of penalties.
Who Can Use the Streamlined Offshore Filing Procedures?
The Streamlined Offshore Filing Procedures are available to U.S. taxpayers living abroad who:
- Are U.S. citizens, resident aliens, or green card holders;
- Have failed to file their tax returns or report their foreign bank accounts due to non-willful neglect;
- Have not been the subject of an IRS audit or criminal investigation in connection with their failure to file.
If you are someone who has not filed your tax returns for the past few years because you weren’t aware of the filing requirement, or because you simply missed the deadline, these procedures are designed to help you get back into compliance and claim your economic relief, including missed stimulus payments.
Additionally, U.S. taxpayers with foreign bank accounts who are in the same situation can also use the Streamlined Procedures to bring their FBARs up to date. The FBAR is a separate reporting requirement, and failure to file can lead to significant penalties. The Streamlined Procedures offer relief from these penalties, which may be a key concern for many expats.
What is the Connection Between Stimulus Payments and Streamlined Offshore Procedures?
In response to the economic impact of the COVID-19 pandemic, the U.S. government passed multiple stimulus packages, providing direct payments to eligible individuals. These payments were intended to help Americans weather the financial fallout of the pandemic, but for taxpayers living abroad or those who had not filed tax returns in recent years, claiming these payments wasn’t always straightforward.
In 2020, the IRS issued two rounds of economic impact payments, often referred to as “stimulus checks.” However, to qualify for these payments, taxpayers needed to have filed a 2018 or 2019 tax return, or otherwise need to be registered with the IRS in their system.
For U.S. expats and others living outside of the country, many faced a unique challenge: If they hadn’t filed taxes for the past few years, they were not automatically eligible for the stimulus payment. In these cases, using the Streamlined Offshore Filing Procedures to get back into compliance with U.S. tax law is a key way to claim these payments, provided that the taxpayer meets all eligibility criteria.
How Do Streamlined Offshore Procedures Help You Get the Stimulus Payment?
The Streamlined Procedures offer an avenue for U.S. expats who have missed tax filings to claim their missed stimulus payments. By filing back tax returns under the Streamlined Procedures, individuals can be brought back into compliance, enabling them to receive the stimulus checks for the years they missed.
1. Bringing Tax Returns Up to Date: The primary step in the Streamlined Offshore Filing Procedures is filing delinquent returns for the past three years. This is crucial because the IRS requires tax returns to determine whether you are eligible for a stimulus payment. By catching up on those filings, you essentially position yourself to receive any payments you missed.
2. No Penalty for Non-Willful Violations: Unlike the regular procedures, which can result in hefty penalties for failure to file or pay, the streamlined process removes penalties for individuals who were non-willful in their failure to file. If you meet the eligibility requirements, the IRS won’t impose fines or penalties, which can otherwise add up quickly and make the process unnecessarily expensive. This penalty relief makes it much easier for expats to use the streamlined process to claim their missed stimulus payments.
3. Eligibility for Missing Stimulus Payments: Once your tax filings are up to date, the IRS will have a current record of your income, filing status, and dependents - key factors in determining your eligibility for the stimulus payment. As long as you meet the IRS requirements (such as having a valid Social Security Number and making below the income threshold), you will be eligible for the payment. For most taxpayers, that means receiving a direct deposit or paper check from the IRS based on their most recent tax filings.
4. Payment Deadlines: If you are missing a payment from the first two rounds, your deadline for filing a 2020 return for this purpose expired in May 2024. But if you are missing a payment from the third round, you can still file a 2021 tax return and claim the Recovery Rebate Credit on Line 30 of IRS Form 1040. Your deadline to file is April 15, 2025, so there isn’t much time lift to take advantage of this additional opportunity.
Conclusion
If you’re a U.S. expat or someone living abroad who has missed filing U.S. tax returns in recent years, the Streamlined Offshore Filing Procedures can provide a much-needed opportunity to claim missed stimulus payments. By your filings up to date, you can access the financial relief you’re entitled to without facing harsh penalties.
