Calling all Americans abroad! The new compliance campaigns that the IRS has launched in recent months are unquestionably aimed toward one group in particular: Americans abroad who haven’t filed their taxes. So, we’re going through the campaigns one by one to get expats the information they need in order to prepare in advance. Read on to find out what the IRS is doing to detect high income non-filers.
What Are Compliance Campaigns?
The Large Business and International Division (LB&I) of the IRS sporadically launches new promotions in an effort to address tax noncompliance. This started a long time ago; the LB&I initiated this tradition on January 31, 2017, as the “culmination of an extensive effort to redefine compliance work and build a supportive infrastructure.” Lately, the IRS policy is trending greatly towards seeking out noncompliant taxpayers and diminishing lenience.
However, there’s no reason to panic. Compliance campaigns are not new. Presently, LB&I has terminated six campaigns but maintains 52 operational compliance campaigns. What Americans abroad need to keep in mind is that the latest campaigns are almost entirely targeted at expat tax compliance.
The new campaigns launched late this past summer are:
- S Corporations Built In Gains Tax
- Post-OVDP Compliance
- High Income Non-Filer
- US Territories – Erroneous Refundable Credits
- Section 457A Deferred Compensation Attributable to Services Performed Before January 1, 2009
How Will the High Income Non-Filers Campaign Affect Americans Abroad?
The high income non-filer compliance endeavor will be on the lookout for Americans abroad who have high income and are not caught up on their taxes. There is no set definition of high-income in this case, but you can bet the audits will focus on those that will generate the most reward for the IRS’ effort. In other words, the higher your income and more egregious (in the IRS’ eyes) the noncompliance, the more your neck is sticking out. The IRS will bring these taxpayers into compliance via examinations.
How Can Americans Abroad Be Prepared?
The IRS’ latest compliance initiatives are indicative of a new, more punitive period of expat tax regulation. When imposed, expats will find the status quo has changed significantly. Though the IRS hasn’t released detailed guidelines on how these compliance initiatives will function, certain preparatory steps are worth taking.
For instance, some of the IRS amnesty programs, such as the Streamlined Filing Procedures, can only be used if you were unaware of your tax-filing requirements, and if you voluntarily come forward. Voluntarily coming forward means that you contact the IRS and file your late taxes before they contact you. Once they have found you (which is all the more likely due to this new campaign), you will be ineligible to use any of the amnesty programs that require voluntarily coming forward.
To use the Streamlined Filing Procedures, you’ll need to file three years of Federal Tax Returns, six years of FBARs (Foreign Bank Account Reports), and a form that certifies your noncompliant status was non-willful. In other words, this program is specifically for expats who are multiple years behind, and who were unaware of their continued filing requirement after moving abroad. The upside? When you use the Streamlined Filing Procedures, you become compliant penalty-free. It’s a great way to rectify your tax situation and save money at the same time.
Don’t forget that the IRS is concurrently actively revoking the passports of those who have seriously delinquent tax debt. Yes, if you’ve racked up enough penalties and fees to push you beyond the $52,000 threshold, which is the IRS’ definition of seriously delinquent tax debt, then your passport is at risk. Just one more reason to get compliant ASAP.
Ready to Get Caught Up on Your Expat Taxes?
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