Here it is. Was this what you were waiting for?
IR-2012-65, June 26, 2012
WASHINGTON — The Internal Revenue Service today announced a plan to help U.S. citizens residing overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues.
“Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.
Shulman announced the IRS will provide a new option to help some U.S. citizens and others residing abroad who haven’t been filing tax returns and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes. The new procedure will go into effect on Sept. 1, 2012.
The IRS is aware that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs). Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law.
To help these taxpayers, the IRS offered the new procedures that will allow taxpayers who are low compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years.
The IRS also announced that the new procedures will allow resolution of certain issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans). In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis. The streamlined procedures will be made available to resolve low compliance risk situations even though this election was not made on a timely basis.
Taxpayers using the new procedures announced today will be required to file delinquent tax returns along with appropriate related information returns for the past three years, and to file delinquent FBARs for the past six years. Submissions from taxpayers that present higher compliance risk will be subject to a more thorough review and potentially subject to an audit, which could cover more than three tax years.
The IRS also announced its offshore voluntary disclosure programs have exceeded the $5 billion mark, released new details regarding the voluntary disclosure program announced in January and closed a loophole used by some U.S. citizens. See IR-2012-64 for more.
IRS Says Offshore Effort Tops $5 Billion, Announces New Details on the Voluntary Disclosure Program and Closing of Off
WASHINGTON — The Internal Revenue Service today announced that its offshore voluntary disclosure programs have exceeded the $5 billion mark and released new details regarding the voluntary disclosure program announced in January, including tightening the eligibility requirements.
“We continue to make strong progress in our international compliance efforts that help ensure honest taxpayers are not footing the bill for those hiding assets offshore,” said IRS Commissioner Doug Shulman. “People are finding it tougher and tougher to keep their assets hidden in offshore accounts.”
Shulman said the IRS offshore voluntary disclosure programs have so far resulted in the collection of more than $5 billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the first two programs. In addition, another 1,500 disclosures have been made under the new program announced in January.
The voluntary disclosure programs are part of a wider effort by the IRS to stop offshore tax evasion and ensure tax compliance. This includes beefed up enforcement, criminal prosecution and implementation of third-party reporting through the Foreign Account Tax Compliance Act ( FATCA).
The IRS also closed a loophole that’s been used by some taxpayers with offshore accounts. Under existing law, if a taxpayer challenges in a foreign court the disclosure of tax information by that government, the taxpayer is required to notify the U.S. Justice Department of the appeal.
The IRS said that if the taxpayer fails to comply with this law and does not notify the U.S. Justice Department of the foreign appeal, the taxpayer will no longer be eligible for the Offshore Voluntary Disclosure Program ( OVDP). The IRS also put taxpayers on notice that their eligibility for OVDP could be terminated once the U.S. government has taken action in connection with their specific financial institution.
Additional details of these eligibility issues are available in a new set of questions and answers released today on the current OVDP, which was announced in January ( see IR-2012-5). The IRS reopened the OVDP following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs.
This program – which helps bring people back into the tax system — will be open for an indefinite period until otherwise announced. The program is similar to the 2011 program in many ways, but with a few key differences. Unlike last year, there is no set deadline for people to apply. However, the terms of the program could change at any time going forward.
Under the current OVDP, the offshore penalty has been raised to 27.5 percent from 25 percent in the 2011 program. The reduced penalty categories of 5 percent and 12.5 percent are still available.
The IRS also announced a plan to help U.S. citizens residing overseas to catch up with tax filing obligations and assistance for people with foreign retirement plan issues. See IR-2012-65 for more.
Editor’s note: Here are more details on the procedure:
New Filing Compliance Procedures for Non-Resident U.S. Taxpayers |
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Of course the whole thing really begs the basic question of, WHY is tax filing by none residents even necessary at all? I guess that that question isn’t even suppose to be asked.
Yes, if it includes immigrants as well! I will likely inquire about it in September and well keep you all updated.
Nope. Nowhere near good enough. I refuse to be treated as anything other than an EU citizen whilst resident in the EU! No forms, no reporting of bank accounts, no double taxation liability, no potential military draft – No recognition of the claim of a foreign government to own me as cattle no matter where I am in the world.
The only “assistance” that I want is a CLN in my hand. Period.
*”Will you step into my parlor said the spider to the fly?…”
http://holyjoe.org/poetry/howitt.htm.
Can someone tell me what would qualify someone as a ‘high compliance risk’? Our only real taxable gain was in 2008, outside the 3 year filing requirement, but included in our OVDI submission!!!
Too little, too late. I agree with Roger (LOL), and especially Recalcitrant: the problem is not simply that the United States has proven itself unworthy of our trust or our allegiance, but that it’s attempt at extra-territorial jurisdiction over citizens and alleged citizens is a severe violation of the universal human rights. The current administration has attacked citizens abroad with these extra-territorial claims, and the insistence of the violation of our rights, including the right to the presumption of innocence. A man’s home is his castle: “The poorest man may in his cottage bid defiance to all the forces of the crown. It may be frail – its roof may shake – the wind may blow through it – the storm may enter – the rain may enter – but the King of England cannot enter.” Neither may Obama or Shulman or Geithner. Don’t tread on me.
It’s a good start, at least the IRS now acknowledges that US citizens abroad have not filed simply because they were not aware of the requirements. I’ll wait to see the details about how the penalties would apply, and if it includes immigrants as well. Although we would like to see the end of all taxation and reporting requirements to US citizens residing abroad, note that the IRS does not have to power to do such a change as it would require congressional action.
I wonder if this announcement has anything to do with my recent letters to representatives and senators. If it does, I’m starting to believe in democracy again.
High risk compliance:
“The IRS will determine the level of compliance risk presented by the submission based on certain information provided on the returns filed, and based on certain additional information that will be required as part of the submission. Low risk will be predicated on simple returns with little or no U.S. tax due. Absent high risk factors, if the submitted returns and application show less than $1,500 in tax due in each of the years, they will be treated as low risk. In general, the risk level will rise as the income and assets of the taxpayer rise, if there are indications of sophisticated tax planning or avoidance, or if there is material economic activity in the United States. Additional risk factors include any additional history of noncompliance with United States tax law and the amount and type of United States source income. Additional information regarding the specific factors the IRS will use to assess the level of compliance risk, and how information regarding those factors should be presented in the submission, will be released prior to the effective date of the new procedure.”
I just posted this on the Globe’s comment section for this story. I am totally infuriated that McKenna and his colleagues can’t see the forest for the trees. I wonder, will anyone EVER do the right story on this:
Here’s the comment:
Once again, this is an amnesty in name only. People who have lived here for decades, people who thought they’d ditched their US citizenship 30-40 years ago, people who want nothing more to do with the US — will find this just as unacceptable as the previous bogus amnesties. What’s that old saying? Fool me once, shame on you; fool me twice, shame on me.
If the US wants to develop a real amneesty, it will give all these accidental Americans, former green card holders, and expats who left 30-40 years ago or more an opportunity to formally sever those ties without any tax filing obligations whatsoever. Just mail out Certificates of Lost Nationality with no questions asked to all those who clearly qualify. That would be an amnesty that might mean something.
Until the US gets rid of its two main stultifying obsessions — that everyone who leaves the country is a tax cheat, and that it has a right to make tax slaves out of all its expatriates through citizenship based taxation (which no one else in the civilized worl practices) — there will be no reconciliation here.
Why does the IRS and the US State department keep playing these games. Despite what those analysts say — I see nothing in this that would encourage me or my wife (born in the US and a citizen of Canada for 38 years) to submit to US tax jurisdiction. What for? We have paid taxes in Canada since 1969. We owe the US nothing.
And G&M: will you EVER stop using that odious and insulting — not to mention pejorative and inaccurate — term “come clean?” Progress is measured in small steps and it would be nice to see that one. Any day now, maybe you will devote journalistic resources to exposing what an unprincipled sham is US tax policy and its application to people who not only don’t live there, but benefit from none of the country’s services. How about an expose on that?.*
*A breeze of hope and a light in the end of the tunnel. But let´s not settle for that. It seems that for some reason -elections maybe- the IRS wants to placate us and seems willing to recognize that we have been mistreated by them. It is a good beginning. I feel encouraged. Let´s now brake all of this down into details and be very clear about what they now want from us. I also would love to hear where they got this 5 billion dollars, especially from whom: Americans Living and Working Abroad? Perhaps, as I have hoped all along, democracy will prevail after a lot of people have been hurt and sleepless nights. And perhaps Obama is beginning to see the unfairness of what his administration is doing to us.
@Arrow…
Absolutely agree. You would be foolish to expose yourself to them…
I add this to the Globe and Mail article:
Barrie:
The IRS sent me a bill for over $3000–all my income income was in Canada. Not one penny in the United States. Now according to the $1500 tax owing threshold, I’d be in big trouble, right?
Let’s get the story straight. This is an extra-territorial tax grab. It is not beneficial to Canada. We need to get the Canadian [government] to stand up to the United States and to protect our citizens and our residents, otherwise, the United States will continue to harass our people. When is the journalistic community in Canada going to finally stand up to the IRS? When are you going to get your noses out of joint? Please, Barrie, get angry and tell the true story of how the United States is robbing from the tax base Canada and other countries in order to try to stop the gaps in their profligate spending habits of 1.5 trillion dollar deficits. When are the journalists in Canada going to start telling the Americans to grow-up and to tax their own people instead of reaching across the border and attacking the people of Canada. It is impossible to live with a neighbor who thinks that 1 out of every 30 people in your country should be paying taxes in the United States–that they left the United
States in order to avoid paying their “fair share”.
“Come clean”? Arrow is right. That is insulting and incorrect. Please Barrie. Stop using that kind of language and start telling the true story of the greed and corruption in the United States that stinks so much that even heaven has to cover the nose. But certainly this stench blows in the direction of Canada as Obama administration, desperate for cash, shakes down even long term residents and citizens of Canada. Peter W. Dunn, http:isaacbrocksociety.ca
@petros, if the IRS only wants to go back 3 years and if my husband and I qualify as ‘low compliance risks’, that means we would not need to expose the large capital gain on the sale of our house (2008). Now if they keep the tax and penalty that they already have from us under OVDI, and let others walk with 3 years of tax filings…I will not be a happy camper.
@ bubblebustin
The notice also says …
“Submissions that present higher compliance risk are not eligible for the
procedure and will be subject to a more thorough review and possibly a
full examination, which in some cases may include more than three years,
in a manner similar to opting out of the Offshore Voluntary Disclosure
Program.”
Lard only knows what they’ll do with that proviso. The IRS is putting bandaids over bandaids but the wound is still weeping. The problem still remains — citizenship based taxation.
*From the Globe’s story:
“The IRS initially promised details of the amnesty late last year.
But U.S. officials have struggled internally over whether people who haven’t filed for years deserve any special leniency.”
Which is new to me.
It is a baby step in the right direction. I think it means they have heard us, and it acknowledges that we’re not all tax cheats, and maybe that will be reflected in how they handle the tax forms (like mine) that have already been submitted..
If that had done this 2 years ago, it might have been more acceptable. But as they say, “the devil’s in the details” It appears it’s going to require a specific “submission” What sort of information are they going to be looking for? What does one have to do and how much income or assets can you have to be “low risk”? I reserve judgement on this whole thing until I’ve seen the specifics, but it does seem like progress of a sort.
It wouldn’t be enough to stop me from renouncing, however, when I’m safe to do so. Citizenship based taxation is still a big problem.
CanuckDoc wrote: “It wouldn’t be enough to stop me from renouncing, however, when I’m safe to do so. Citizenship based taxation is still a big problem.” Exactly. This is the heart of the matter and why the United States which punishes its expats is a fading light in the world as darkness creeps over the whole place.
Bubblebustin wrote: “I will not be a happy camper.” I think one of the problems with paying the money back is it is not easy to get it back, even if they change the rules later. You’ve already disclosed the capital gain. You not likely get that cat back in the bag.
I filed three years of tax returns and six FBARs last August. I wonder if I’m supposed to do anything else?
(I’ve been angry about it since I filed them, but I wanted to be done with it. As it is, I’m not even sure I did it right, and haven’t filed this year’s return yet. I applied for an extension, though. Grrr. I’d actually managed to put it out of my mind for a while, and now all the frustration is coming back).
” In general, the risk level will rise as the income and assets of the taxpayer rise, if there are indications of sophisticated tax planning or avoidance, or if there is material economic activity in the United States.”
So, who wants to take the risk that something they do in their ordinary, tax-compliant local financial lives will be regarded as evidence of “sophisticated tax planning” by a guy who doesn’t have a passport? If I weren’t already compliant I wouldn’t go in. My “Controlled Foreign Corporation” (aka “the company I registered by taking the subway over to the Company Registry, rather than incorporating halfway around the world in Wyoming using a guy on the internet who promised me total anonymity”) would probably put me at least at Threat Condition Orange.
*I think we should thank the IRS for finally starting listening to us. And hope that they will continue to do so as we work with them. We are Americans Abroad and want to be treated with respect and have our voices heard. We also should make clear that we support the IRS for going after Americans who try to hide investments in order not to pay taxes. But we do resent being placed on this category. That we hope that they will realize that citizen based taxation is unfair and it is not done by any other country, except for Eritreia. But until we change this law we want to work with the IRS and are hoping that it will be fair to us, treating and penalizing us the way they do to Americans living in the USA.
President Obama has just announced that he has instructed Homeland Security to cease deporting foreign citizens who are in the United States, having entered illegally or having overstayed their visas. The only exception is if the person here illegally has committed a felony. Illegal presence in the US is only a misdemenor.
I suppose he could direct the IRS to not enforce the taxation of US citizens who live abroad, but my guess is that Hell will freeze over before he would ever do that.
France has just concluded its election of 7 overseas French citizens elected by French citizens abroad to represent them in the National Assembly. French citizen abroad are not subject to French taxation, but they have a voice and direct representation in the Assembly in Paris. What a contrast.
Crikey, I’m over on a Facebook group page for a green card lottery and the administrator there wrote in response to my warnings about the green card’s tax obligations: “the information I was given is that what you say is true for citizenship but it is not true fro the green card. This is why many people remain on the green card and do not ask citizenship. Again, what you say is true for people who become citizen but not for green card holders. This is why it is called “citizenship based taxation.” but thanks for letting the group know though.”
It’s frightening that those promoting permanent residency in the US don’t know about this!
@bubblebustin
Crikey indeed!!!! So, are you going correct him with some IRS web page education, that a US person is indeed a Greencard holder and set them straight?
http://www.irs.gov/businesses/small/international/article/0,,id=96395,00.html
btw… My comment on what I have read so far… It takes me a while to get my brain around these things, but this is what I posted over on Jack’s blog..
I am still digesting it, but at first blush, it seems to me that they are creating a process to finally separate Minnows and Whales at the front end, so to speak, and not run everyone through the OVDI to the back end Opt Out.
I draw that initial conclusion from this…
There is certainly more to read and digest, and wait for the final process, but this might, and I stress MIGHT deal with many of the frustrations and complaints we have had with the OVDI. Time will tell, and still too early to jump to conclusions. I think we have a new unit of measure in the making now, the MCU. Minnow Complaint Unit = 3 years of bureaucratic time it takes to correct an errant OVDI policy. 🙂
For those still waiting for the end of Citizenship taxation, it has taken 12 MCUs so far, to no avail. Or is it more? Roger, set me straight!
One disappointing note. On the surface, none of this seems to apply to Minnow resident immigrants, although the same issues of “‘low compliance risk factors” apply, and I hope that is something that will be corrected, or better spelled out in the instructions yet to come.
Also, hopefully they will clarify that “accidental Americans” that are still subject to a 5% tax inside the OVDI should not be joining the OVDI in the first place!! In fact, maybe they will be more specific about those that should NOT join the OVDI instead of leaving it up to certain class of practitioners to frighten everyone into the program because of the implied FBAR penalty threats.
Let’s hope this is the beginning of a more rationale approach to compliance, setting aside the citizenship taxation issue. Time will tell.
Regardless, of the people I know who are US persons, they will NEVER have anything near full compliance, because so many find citizenship based taxation worth protesting against.
@just me, I also included this at the lottery page: To surrender your Green Card (permanent residence status) you must meet with and fill out the proper forms with the Office of Homeland Security and also file the proper forms with the IRS to end your obligation to continue to pay US income taxes. There is normally a charge of $450 for this process.” The $450 is the same fee citizens pay to renounce US citizenship.