Effective September 1, 2012, the IRS has introduced a new streamlined procedure for American expatriates living abroad who need to file late US tax returns.
American expatriates who have lived outside the United States since January 1, 2009 can become tax compliant by filing only 3 years of tax returns and 6 years of the FBAR (Reports of Foreign Bank and Financial Accounts or Form TD F 90-22.1). Additionally, the IRS will allow a retroactive relief for a deferral of income earned inside a Canadian RRSP, RRIF or LIF. Payment of ordinary tax and interest is required with the submission. The IRS will not assess a late payment penalty if a taxpayer is qualified to participate in the US IRS streamlined program for US expats.
Highlights of this streamlined IRS program
- First, there are no guaranties against the IRS levying penalties if an American expatriate uses this streamlined procedure.
- Taxpayers will be required to file their US expatriate tax returns for the past three years and their FBAR reports for the past six years.
- Only American expatriates who have been living abroad since January 1, 2009 can participate in the streamlined program.
- The IRS will divide taxpayers into two categories: low and high risk. A low-risk person is eligible to participate in this program and will not receive any response from the IRS after filing returns under this streamlined program.
Definition of a “low-risk taxpayer”
- American expatriates who have a simple tax return.
- US expatriates who owe no or less than $1,500 tax on foreign income for each year.
The US tax returns submitted by a low-risk taxpayer will be promptly processed by the IRS. The majority of taxpayers will be low risk and this is the good news for American expatriates who were afraid to come forward.
Definition of a “high-risk taxpayer”
Some of the examples that might raise the risk of a taxpayer:
- American expatriate has not declared all of his/her income in his/her country of residence.
- Any of the expatriate tax returns submitted through this program claims a refund.
- American expatriate has a material economic activity in the United States.
- US expatriate is under audit or investigation by the IRS.
- FBAR penalties have been previously assessed against the taxpayer.
Important IRS update – effective June 18, 2014 – IRS Streamlined Program for Expats
The IRS updated the Streamlined Program for expats on June 18, 2014. Please read the full details about the 2014 IRS Streamlined Program Compliance Procedures right here.
How can Artio Partners help you?
We specialize in past due expat tax returns and complex international tax issues like FBAR, FATCA, foreign tax credit, foreign real estate, PFIC, foreign adoption and controlled foreign corporations.
We have helped American expatriates in over 125 countries. Transparent and Flat Fees. Excellent Customer Service. Audit Support. We offer a special package for American Expats who qualify to participate in the IRS streamlined program.