The IRS announced major changes to the Streamlined Filing Procedures which eliminate penalties for delinquent filers and remove specific restrictions to allow more US taxpayers the opportunity to become compliant with their US tax obligations.
The IRS announced major changes to their existing amnesty programs, which were originally created to help delinquent taxpayers become compliant with their US tax obligations. The changes to the Streamlined Filing Procedures will allow millions of US expats and residents to get caught up on their US expat tax return filing. The changes include:
- Extension of eligibility to US taxpayers residing in the United States
- Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year
- Elimination of the risk assessment process
- Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.
- Waiving of all penalties for US taxpayers living abroad
“These changes are a huge win for US expats who are behind on their taxes because they were unaware of their US filing obligations,” comments David McKeegan, Co-founder of Greenback Expat Tax Services. “From our research and experience with expats, we know the biggest reason for US tax non-compliance is the lack of understanding about their filing requirements.”
The most significant change is that all penalties will be waived for US taxpayers living abroad when filing under the Streamlined Procedure. In addition, eligible US taxpayers residing in the United States will only incur a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that created the tax compliance issue.
“Expats have been hesitant to come forward because of the possibility of harsh penalties and now they have the opportunity to get caught up without that fear,” says McKeegan.
The previous Streamlined Procedures’ restrictions forced many delinquent taxpayers to consider filing under the Offshore Voluntary Disclosure Program (OVDP), which is specifically designed for taxpayers who may be subject to criminal liability and substantial penalties for willful non-filing. The lifting of restrictions is significant, as now a much larger group of honest taxpayers who are not purposely hiding assets can come forward without consequence.
“The changes to the Streamlined Procedures show that the IRS has listened to the voice of taxpayers around the world and is attempting to ease the burden of US tax compliance,” McKeegan explains. “This will be a huge relief for millions of US expats.”
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