Streamlined filing compliance procedures for expats in 2025

Have you been living abroad and just realized you were supposed to file US taxes? Many Americans think moving overseas means they no longer need to report income to the US. Unfortunately, that’s not the case – you still have to file taxes and report foreign bank accounts, even if you haven’t been back in years.

The good news? The streamlined filing compliance procedures allow you to catch up on past tax filings and foreign account reporting with reduced or no penalties.

Whether you’ve missed just a few years or much longer, you can still get back on track and start with a clean slate, all while avoiding hefty fines.

What are streamlined filing compliance procedures?

The Streamlined Filing Compliance Procedures (SFCP) is an Internal Revenue Service (IRS) program that helps delinquent taxpayers catch up on past income tax filings and Foreign Bank Account Reports (FBARs) without facing severe penalties or legal consequences.

Key benefits:

• no penalties for expats who pass a non-residency test
• simplified compliance with minimal effort
• amnesty-like relief for non-willful noncompliance 

Pro tip. The IRS streamlined procedure may be also used for filing amended returns to claim retroactive relief on qualified foreign pension plans eligible for tax deferral.

There are two types of streamlined procedures: Streamlined Foreign Offshore Procedures (SFOP) mentioned above and Streamlined Domestic Offshore Procedures (SDOP). The main difference between them is the residency requirement. SDOP is for US residents while SFOP is for US taxpayers who live outside the country and meet non-residency requirements. 

To qualify for either of these, you must certify that your non-compliance was non-willful. Also, keep in mind that you must pay all taxes and interest owed at the time of submission.

If you’re an American citizen or resident living abroad and haven’t filed your US income tax returns in years, Taxes for Expats can help you get back on track.

Eligibility criteria for streamlined filing compliance procedures

American expats or US holders of foreign bank accounts who haven’t filed tax returns or FBARs due to lack of awareness may qualify for streamlined procedures. You’ll need to file the last three years of tax returns and six years of FBARs.

Key eligibility requirement: You must demonstrate non-willful conduct. That means your failure to comply was due to negligence, misunderstanding, or simple oversight.

Streamlined foreign offshore procedures (SFOP)

To qualify, you must meet the non-residency requirement. This isn’t about citizenship or physical presence – it means you must have spent at least 330 full days outside the US in one of the last three tax years and didn’t maintain a US home.

SFOP eliminates all penalties, including failure-to-file and FBAR penalties.

Streamlined domestic offshore procedures (SDOP)

US residents who don’t meet the non-residency requirement can use SDOP. This option includes a 5% penalty on the highest balance of unreported foreign financial assets during the covered period. This penalty applies in place of the more severe penalties for willful noncompliance. 

If the IRS is already examining your returns for any year, you can’t use the streamlined procedures, even if the examination doesn’t involve foreign assets.

Common scenarios for expats to qualify for streamlined procedures

The program has been around for over 10 years, and we’ve seen common situations where expats can use them to become compliant:

• Accidental Americans – People born in the US but raised abroad, not realizing they have US tax obligations.
• Expats working overseas – Many mistakenly believe they only need to pay taxes in their country of residence.
• Foreign spouses of US citizens – Filing jointly but unaware they need to report foreign assets.
• US retirees abroad – Receiving pensions from foreign institutions but not knowing they need to report them to the IRS.
• Entrepreneurs and freelancers – Earning income abroad and assuming US taxes don't apply since they work outside the US.

Many of our clients first found out about these tax requirements when they wanted to apply for a mortgage or tried to renew their US passport. That’s why streamlined procedures are such an important option for those looking to become compliant, even if they’re late.

5 steps for tax compliance with streamlined procedures

Step 1. Gather necessary documents.

You’ll need your last three years of tax returns and the last six years of FBARs for any foreign accounts exceeding $10,000. Additional documents might include income records, foreign tax statements, and account statements.

Step 2. File delinquent returns. 

Submit completed tax returns for the last three years, including any credits, exclusions, and deductions like foreign income exclusion, foreign housing exclusion, or child tax credit. Then calculate and pay any taxes owed, including interest.

Step 3. Report foreign accounts via FBAR.

Use FinCEN Form 114 to report offshore accounts for the last six years. Make sure to report all accounts held outside the US, including savings, investments, pensions, and insurance with a cash value, if the total exceeds $10,000.

Step 4. Submit certification of non-willful conduct.

Complete Form 14653 (for SFOP) or Form 14654 (for SDOP), including a written explanation for why you didn’t comply. A vague or incomplete explanation could disqualify you from the program.

Step 5: Mail the package to the IRS.

Send all forms and payments to the appropriate IRS processing center.

If you don’t owe any taxes, you won’t hear from the IRS. They don’t send confirmation letters. If you don’t hear back in three months, that’s a good sign that your tax account is in good standing.

Required forms for streamlined filing compliance procedures

To complete the streamlined filing process, you may need the following IRS forms.

• Form 1040 – The standard income tax return required for all US citizens
• FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (FBAR)
• Form 14653 or 14654 – Certification of non-willful conduct
• Form 2555 – Foreign Earned Income Exclusion (FEIE) – Allows expats to exclude up to $126,500 (2024 limit, adjusted annually) of foreign income from US taxes
• Form 1116 – Foreign Tax Credit (FTC) – Offers a dollar-for-dollar reduction in US tax liability based on foreign taxes paid
• Form 8938 (FATCA report) – FATCA is required if foreign assets exceed $200,000 on the last day of the tax year or $300,000 at any point ($400,000 and $600,000 for married taxpayers filing jointly)

Speak with a tax professional to figure out which forms you’ll need based on your specific tax situation.

Potential pitfalls and how to avoid them

Here are some common mistakes to avoid when using streamlined filing compliance procedures:

1. Lack of a well-documented certification of non-willfulness: The key requirement for the streamlined procedure is that your failure to file was non-willful. When submitting your certification letter, you must explain why your non-compliance was not intentional. 
2. Failing to file all required tax returns and FBARs: Some taxpayers mistakenly believe they only need to submit tax returns for missing years. As mentioned above, you need to file the last three years of taxes and six years of FBARs. 
3. Underreporting foreign income: All foreign income, including interest, dividends, and rental income, must be reported on your return. If the IRS discovers unreported income, your submission may be rejected, and penalties could apply.
4. Ignoring additional reporting requirements for foreign entities: If you own or have a significant interest in a foreign corporation, trust, or partnership, you may need to file Form 5471 (foreign corporations) or Form 3520/3520-A (foreign trusts). 
5. Filing incorrect or incomplete amended returns: For those required to amend prior tax returns as part of the program, errors in the amended filings may lead to rejection or additional IRS inquiries.

What to do if you don’t qualify for streamlined filing procedures

If you don’t qualify for the streamlined filing procedures, your next steps depend on the reason for ineligibility:

• If your non-compliance was willful, you may need to consider the Voluntary Disclosure Program (VDP), which involves higher penalties but can help reduce the risk of criminal charges.
• If you were required to file international informational forms (e.g., Form 5471 for foreign corporations) but have otherwise reported all income, the Delinquent Informational Return Program might be an option.
• If you’re only missing FBARs but have reported all related income, the Delinquent FBAR Submission Procedures allow compliance without penalties. 

Take control of your taxes: Consult a tax professional today

Streamlined procedures are a great option for expats looking to become compliant without penalties. However, tax laws are complex, and mistakes can be costly. At Taxes for Expats, our experienced tax professional can guide you through the process and make sure you meet all IRS requirements smoothly and correctly.