IRS Announces Program to Help Americans Resolve Delinquent US Expat Taxes
This week, the IRS announced new opportunities for American and dual citizens living overseas to catch up on their US expat taxes. The IRS plan also provides avenues for expats to become compliant with Reports of Foreign Bank and Financial Accounts (commonly referred to as FBAR forms, or Form TD F 90-22.1), as well as retroactive relief for those who failed to elect deferral on certain retirement and savings plans. The new procedure will go into effect September 1, 2012.
Details about the plan will be announced in the near future, but according to the IRS website:
- The new plan will be similar to the current Offshore Voluntary Disclosure Program.
- Participants will be required to file their US expat taxes, along with related documentation and payment for taxes owed, for the past three years and their FBAR reports for the past six years.
- All submissions will be reviewed, and those considered low risk for compliance will be fast-tracked for approval and no additional penalties or follow-up actions will be pursued.
- If the taxpayer is asking for a deferral for monies contributed to certain retirement and savings plans in countries where the US has a tax treaty, tax returns should indicate the deferral and be accompanied by relevant forms (for example, Form 8891, which is used by taxpayers with certain retirement plans in Canada) as necessary.
- Taxpayers who are claiming a reasonable cause for failing to report their taxes or asking for a deferral for retirement spending may be required to write a brief statement of explanation.
What “Low Risk Factor” Means
As the IRS has indicated that tax returns with a “low risk factor for compliance” will avoid penalties and receive a speedy review, it’s natural to wonder what risk level the IRS would consider your own US expat taxes. For this new program, the IRS defines low risk as simple returns with little to no US tax due, which in this case means less than $1,500 owed per year. The more complex the return or the higher the assets, the higher the risk factor will be. Further details will be released by the IRS, but their current explanation can be found on theIRS website.
Your US Expat Taxes and FBAR Reporting
Overall, this is great news for those Americans living overseas who have been remiss about filing their necessary tax and financial documents. If you are unsure of what to do for your own US expat taxes, Greenback Expat Tax Services offers professional, accurate, hassle-free expat tax preparation at a fair price. Our accountants and Enrolled Agents can also help you address any FBAR reporting requirements that apply to your situation.