New IRS Procedures Help U.S. Citizens Living Abroad
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The IRS has announced plans for new streamlined procedures that will allow U.S. citizens residing overseas, including dual citizens, to get current with their tax filing obligations without facing penalties or additional enforcement action. Scheduled to go into effect on September 1, 2012, the new procedures will provide help to low compliance risk taxpayers who wish to correct previous failure to file timely tax documents, including income tax returns and Reports of Foreign Bank and Financial Accounts (FBARs).
Those eligible for filing under the new procedures generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years; taxpayers presenting higher compliance risk will still be subject to heightened review and possible audit. Under the new procedures, taxpayers will be required to file delinquent tax returns along with appropriate related information returns for the past three years, as well as delinquent FBARs for the past six years.
In addition to aiding overseas U.S. citizens with tax filing obligations, the IRS also plans to provide assistance regarding foreign retirement plan issues. Whereas tax treaties often allow for income deferral under U.S. tax law only if a timely election is made, the new procedures will allow for deferral in low compliance risk situations even where a timely election was not made.
