For taxpayers who’ve fallen behind on their US tax obligations, the Streamlined Filing Compliance Procedures offer a valuable opportunity to return to compliance without facing severe penalties or criminal prosecution. However, many individuals wonder: what happens after the streamlined submission is complete? How does it affect future dealings with the IRS?

In this article, we’ll explore the long-term impact of streamlined filing, including potential audit risk, ongoing compliance requirements, and key takeaways for maintaining a clean tax record going forward.

1. Increased Visibility, But Not Guaranteed Scrutiny

Participating in the streamlined procedures puts your tax affairs under a temporary spotlight. While the process itself is meant to be remedial, it does not grant immunity from future IRS scrutiny.

Audit Risk:

• The IRS may review your streamlined submission to assess the accuracy and completeness of your certification of non-willfulness (Form 14653 or 14654).
• If inconsistencies or red flags are found, such as omitted income, vague explanations, or missing foreign asset disclosures – this can increase the chance of an audit.
• However, there is no evidence that filing streamlined returns automatically triggers a future audit.

How to Mitigate Risk:

• Ensure all information is truthful, complete, and well-documented.
• Retain detailed records of your financial accounts and submission materials.

2. Ongoing Compliance Obligations

Once your streamlined submission has been accepted, you’re expected to remain compliant going forward. This includes timely filing of all relevant tax returns and international information reports.

Key Obligations Include:

• Annual FBAR filing (FinCEN Form 114) if your foreign accounts exceed $10,000 in aggregate.
• Form 8938 (FATCA) for reporting foreign financial assets above specified thresholds.
• Worldwide income reporting, even if it is also taxed in another country.
• Filing foreign trust, corporation, or partnership disclosures if you have control or ownership (e.g., Forms 3520, 5471, or 8865).

Missing any of these in future years may call your original submission into question and result in penalties.

3. No Special Immunity

Although the streamlined procedures offer a waiver of certain penalties, they do not provide permanent protection against future enforcement actions.

Important Caveats:

• The IRS may still take action if future non-compliance appears wilful.
• If the IRS determines your original submission included wilful misstatements, they can revoke the protections of the streamlined programme and pursue penalties or even criminal charges.
• Submitting under the streamlined procedures does not prevent the IRS from questioning or auditing other parts of your financial history.

4. A Chance to Start Fresh

For many, the streamlined process offers a valuable opportunity to “reset the clock” and move forward with a clean record. With your prior years corrected and penalties waived or reduced, you’re now in a stronger position to manage your taxes with confidence.

Best Practices Going Forward:

• Consider working with a qualified tax advisor to ensure continued compliance.
• Set reminders for key deadlines: FBAR (15 April, with automatic extension to 15 October), and income tax returns (15 April, or 15 June for expats).
• Keep detailed records of all foreign accounts, income sources, and tax filings.

Final Thoughts

Participating in the Streamlined Filing Compliance Procedures is a proactive step toward restoring tax compliance, but it’s just the beginning. While the process can help mitigate past mistakes, the responsibility to maintain good standing with the IRS moving forward rests with you. With the right approach and continued diligence, the streamlined process can be a springboard to future compliance and peace of mind.

The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.

If you would like more information or want to schedule a one-on-one consultancy call, please get in touch using our contact form.