Form 14653 – Certification For Streamlined Foreign Offshore Procedures for Expats

Under the streamlined foreign offshore procedures, taxpayers must certify that their conduct relating to the failure to file U.S. tax returns, report foreign income, and disclose foreign financial accounts was not willful. This certification is made on Form 14653 – Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures.

For many U.S. expats, Form 14653 serves as the key to a successful streamlined submission. When properly completed and supported, it would allow you to return to compliance without incurring penalties.

​​What “Non-Willful” Means on Form 14653

A central requirement for qualifying for the Streamlined Filing Procedure is that your conduct must be non-willful. The IRS defines non-willful conduct as conduct due to negligence, inadvertence, or mistake, or a good faith misunderstanding of the requirements of the law.

Some examples of non-willful conduct include being unaware of your tax obligations, relying on bad tax advice, or misinterpreting tax rules. If your failure to file your tax returns was not intentional, you must certify that on Form 14653.

On the other hand, if you were aware of your obligations and chose not to comply, the streamlined procedures will not apply. Any indication of intentional avoidance in your statement may result in your submission being denied the benefits of the program.

What You Must Include on Form 14653

On the Form 14653, you must provide a detailed narrative statement of facts explaining the reasons for your failure to report income, pay tax, and submit required returns (including FBARs). Include relevant personal, financial, and background details that support non-willful conduct, such as your understanding of obligations at the time and steps taken upon discovery. Be complete and consistent with your records.

You must include the whole story, including favorable and unfavorable facts. Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all taxes, and submit all required information returns, including FBARs.

Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset, including withdrawals, deposits, and investment/management decisions. Provide a complete story about your foreign financial account/asset.

The above points address common requirements that must be included in the Form 14653 and the challenge that many taxpayers face in providing adequate explanations and commentary on their factual “story”.

Common Explanations Required For The Form 14653

There are several common situations that often require explanation on Form 14653.

• Many taxpayers fail to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, an explanation must be provided.
• Taxpayers who own or control a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) and failed to properly report ownership of the entity or transactions with the foreign entity (such as on the Form 5471). If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, an explanation of why and inclusion of your understanding of your reporting obligations to the IRS and to foreign jurisdictions will be needed.
• If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.
• If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

How to Prepare a Strong Statement of Facts

The statement of facts is the most critical part of Form 14653, as it could determine the outcome of your streamlined submission.

Your statement should describe your background, including where you lived and worked during the relevant years. It should explain what you believed about your U.S. tax obligations at the time and why that belief led to your failure to file or report. You should also describe how and when you became aware of your obligations and what steps you took to correct the issue once you learned about it.

Your explanation should remain factual and consistent. The IRS expects specific details that align with your tax filings and financial records. Small inconsistencies in your statement can raise questions during review.

Form 14653 vs Form 14654

Form 14653 applies to U.S. citizens or green card holders who live outside the United States and meet the non-residency requirement. This means that you did not maintain a U.S. abode and were physically outside the U.S. for a significant portion of the year. When filing jointly, both spouses must meet this requirement, and each must provide their own explanation if their circumstances differ. When accepted, it allows you to come into compliance without penalties.

Form 14654 applies to taxpayers who do not meet the non-residency requirement and are considered U.S. residents for streamlined filing purposes. While both forms require a certification of non-willful conduct, the domestic program carries an additional 5% penalty based on foreign financial assets.

How Form 14653 Fits Into the Streamlined Filing Process

Under the streamlined foreign offshore procedures, you must file the most recent three years of delinquent or amended U.S. tax returns, along with six years of delinquent FBARs if applicable. You must also include any required international information returns, such as Form 8938, Form 5471, or Form 3520.

You will attach Form 14653 to each tax return included in your submission. The entire submission is made through a paper filing to the IRS. FBARs must be filed separately through FinCEN’s electronic filing system.

What Happens After You File Form 14653

After you submit your streamlined filing package, the IRS will review your tax returns, along with your Form 14653 statement of facts. There is no fixed timeline for this process. Some taxpayers see progress within a few months, while others may wait longer.

You may not receive a formal acknowledgment or be contacted if your submission is accepted. However, the IRS may request additional information if something in your submission requires clarification.

If the IRS determines that your explanation does not support a non-willful position, your submission may not qualify for the streamlined procedures. In that case, your returns may be processed under normal procedures, which may result in penalties.

The Importance of Careful Preparation

Form 14653 requires careful drafting and a thoughtful explanation of your situtation. The IRS relies on your statement to determine whether your conduct qualifies as non-willful.

Because of this, many taxpayers find it helpful to work with a professional who understands the streamlined procedures and the expectations surrounding Form 14653.

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Every effort has been made to provide accurate and current tax information. This article is not a substitute for professional tax advice based on your individual circumstances. Tax law changes frequently. Please consult a qualified tax professional before making decisions based on this content.