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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IRS Cuts Middle Class Expats Big (And Deserved) Penalty Break by Janet Novack, Forbes Staff
The relief will help middle class folks who have been living for years in high tax foreign countries such as the United Kingdom, and particularly the estimated one million Americans living in Canada.
@bubblebustin, No, there is no charge to return a green card, and the process is more simple than to renounce citizenship. There is a one-page form to fill in, and only one visit to a US consulate or embassy is necessary. The person may also apply for a visitor visa on the same day. However, the IRS expatriation forms and rules are the same as for renunciation if the person has been a US resident for at least 8 years (calendar years, in whole or in part). If it is less than 8 years, there are no expatriation forms or rules.
http://mumbai.usconsulate.gov/legal_permanent_residents.html
http://photos.state.gov/libraries/164203/dhs/I-407.pdf
I am happy. It is a step in the right direction. This year I already filed for extension and collecting tax and FBAR data for past 6 years. I already filed FBAR. I did that because I don’t want to commit willful violation, after I am aware of my Tax and FBAR obligations.
But I am worried because, by submitting FBAR and request for extension I informed IRS about my tax obligations. With this new opportunity to become compliant, I can sleep better. Of course, I am still worried but now far less worried. Now I need to collect only for 3 years instead of 6 years. I have no plans to return to the USA, so I can’t afford huge tax filing costs year after year. I hope, I still can relinquish after filing for 3 years (as opposed to 5 years).
I hope and pray that US switches to territorial based taxes, but IRS can’t do that. Only the congress can change the law. We must all work even harder to educate US population and congress. Once we become compliant, we can campaign for change using of real names openly (instead of anonymous identifications and staying in the shadows). I will continue my fight for territorial taxes for my children and I know it is essential for the USA to promote exports.
I admire the effort of Petros, Just Me, Roger Conklin, renounceuscitizenship and others in this forum. You are inspiration. Without this website and many informative messages, I might have entered OVDI few months back. I left the USA in mid 1990s, and owe no taxes to the IRS due to higher taxes in India. Thank you all for your support, wisdom and guidance to innocent expats.
@Markpinetree: I agree 100%. They well articulated my feeling. No middle income professional with little savings move to poor high tax countries like India to evade taxes. After working for few years, we may move back to our countries to stay close to our families and support old parents.
Markpinetree said: 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.
@ bubblebustin
“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.”
Well that’s news to me since I just surrendered my long expired green card via I-407 but there was no fee involved. Still waiting for the USCIS stamp of approval but with or without it I’m going on with my life and will consider myself “divorced” from the IRS. I will continue to stay on my side of the border and hope the Canadian government will honour its commitment to Canadian citizens.
@ Shadow Raider
There is no need to visit a consulate to submit an I-407. As per the Calgary consulate’s advice via e-mail …
I-407 ABANDONMENT OF LAWFUL PERMANENT RESIDENCE
A card holder is not required to come to the consulate. LPR card and I-407 can be sent directly to USCIS.
USCIS TSC
P.O. Box 850965
Mesquite, TX 75185-0965
I think this announcement reflects a combination of a lot of things which various of you mentionned: the upcoming election, limited recognition of the arguments of US persons abroad, and the desire to look less nasty so that the countries who are resisting FATCA and the rest might cooperate.
But, as so many of you pointed out above, there are huge loopholes such as the definition of substantial tax avoidance risk, which is vague at best. I am not satisfied with this offer, we need to press forward for total abolition of citizenship based taxation.
There is plenty of room for bait and switch techniques just as in the previous OVDIs. Once again we would be at the whim whatever examiner takes the case.
I agree with what Bubblebustin said, are they going to give her her OVDI “tribute” back?
Cross-post from FTC:
I’m completely underwhelmed by this announcement. When I see announcements like this I feel blessed not to live in the US any more, or be subject to its awful government and its poor imitation of the rule of the law.
It’s a blatant attempt by the IRS to address their “Canadian Problem” and carve-out of a specific class of taxpayer that is causing them aggravation and generating excessive ill will towards the US govt and IRS. Of course it doesn’t address the wider injustice being perpetrated against a whole raft of people (e.g. immigrants). Yet again (as with the 2011 OVDI FAQs) they’ve drawn more arbitrary lines in the sand which create winners and losers, and confuse people even more about what they may be eligible for, or at risk of. The new arbitrary lines (must be non-resident, must have < $1,500/year tax due) are an attempt to obfuscate the real underlying causes of non-compliance, and the mitigating factors that should be used for granting relief. That is; the US government created a regulatory framework that inevitably ensnares millions of people based on their legitimate circumstances, then completely fails to
a) inform people of their obligation; or
b) allow them discover the obligation; or
c) address past filing mistakes without being financially destroyed.
Everyone except a narrowly-defined set of bad actors should get a pass because of these true causes of FBAR non-compliance.
I disagree with the notion that this announcement is a “step in the right direction”. As with earlier attempts to carve-out specific classes of taxpayer, it makes the IRS look even worse than they did before. It highlights the flawed-by-design nature of the whole programme, and shows them to be capricious in the extreme. I’m a fan of the expression that you should never attribute anything to malice that can be attributed to stupidity. The IRS looks less stupid, and more malicious every time they do something like this.
The one ray of hope it is that Shulman is stepping down in 3 months. His successor has the choice of attaching the OVDI millstone around their own neck and continuing where Shulman left off, or putting a stake though the heart of this monster. If they have more than two brain cells to rub together they’ll swiftly give everyone a pass, and (rightfully) pin the blame for the necessitated policy reversal on his predecessor as the architect of the awful Programme. Otherwise he/she is going to start their tenure with a klausterfokken that somebody else created, and he/she now owns.
I agree, what exactly is the big deal about this announcement? amazing that anybody would have the tiniest confidence left in the IRS. Did they say that expats are now excluded from FBAR and FATCA?
@Markpinetree
OMFG! What are you Markpinetree, an IRS agent or just a socialist fool? You act like the IRS is some kind of benevolent bureaucracy worried about our welfare instead of being the strong-arm of a corrupt and illegal government.
No, I am not an IRS Agent, neither I am a socialist, much less fool. I simply believe in the democratic process and like to be part of it. I see no alternative. And it seems to me that we are moving a little bit towards a better understanding of the plight of Americans Abroad. But we must not rest and continue to press for changes in all levels. I trust that we together will be able to change this incredible demands on us. Let´s keep moving ahead.
The IRS press release states that 33’000 taxpayers (“disclosures”) participated in the first two programmes and 1’500 have participated in the third programme, which started in January 2012. Although it may be too early to judge, 1’500 is a drop in the ocean and does not evidence a successful third programme.
@Confederate,
I agree with you about the IRS, and especially, I agree with how Moby has understood this latest maneuver by the IRS. Yet I think you have unfairly characterized our friend MarkPinetree. I understand him as having been battered by a country he once held in highest esteem. He continues to believe that it may be possible to change the system through the democratic process. Others at Isaac Brock consider that day long passed. We’ve been abused and we must relinquish citizenship in order to put an end to the abuse. The relinquishment is like a restraining order put placed on a former lover who has become abusive of spouse and children.
Is there hope that the US government will change its abusive ways towards its foreign-based citizens? Not a chance, in my view, but I will allow others, including MarkPinetree, American Citizens Abroad and our friend Roger Conklin, to maintain a glint of hope that the US will come to its senses.
This addresses some of the penalties, but does not address the problem that already existed before the recent penalty drive began, which is that US law prevents Americans abroad from being able to have any semblance of a normal financial life. To do that, they should:
–Ideally, eliminate citizenship-based taxation.
Failing that:
–Don’t apply things like PFIC rules, foreign insurance excise tax rules, and all other rules that make it difficult to use foreign financial institution merely for being foreign, to US citizens and green card holders who are legitimately resident abroad. I can see the purpose of such rules when applied to residents of the US, who have domestic alternatives, but they are completely unreasonable when applied to people who do not live in the US.
–Don’t make US citizens undesirable to have as customers by non-US financial institutions. This to my mind is the real issue with FATCA — I don’t care about reporting, as long as I am not prevented from having the accounts I need to buy groceries, pay the mortgage, and save and invest for retirement.
–Make sure everybody knows about these rules! It is completely unacceptable and unprincipled to have such unmarked landmines scattered about the tax code. Give honest taxpayers a fighting chance, for heaven’s sake!
*I agree with Moby’s assessment of this latest “amnesty”. People in Congress and the IRS just don’t seem to understand one of the main objections of US expats to all this — the requirement for onerous, intrusive, and time-consuming (or expensive) annual reporting just to prove to the IRS that no tax is owed.
Personally, I’m so happy that I did not maintain dual citizenship after I became a Canadian citizen over 30 years ago. I will be even happier after the process of documenting my relinquishment is over and the US finally realizes that I no longer belong to them.
Others have used the metaphor that the US is like a vindictive ex-spouse after a divorce. I like that metaphor and I suggest another: To me the US is like an aging, once-loved parent who is becoming increasingly demented. There were significant signs of it in the 1960s and 1970s, and of course the GWB era, but now major parts of its “brain” — Congress and the Executive bureaucracy — are really becoming dysfunctional. It’s all very sad. I’m willing to visit the Old One from time to time, but I can’t stop its decline.
@AnonAnon
Excellent analogy – ‘to me the US is like an aging, once-loved parent’. Too true. In the last few years of my mother’s life, I would return to the States for a visit and always feel that the mother, I had known, was already gone as my mother had dementia.
Now I feel that way about the country I had been born into and once so loved. That country is gone – will it return – I don’t think so. Now I just need to get through the grief.
So who would I need to contact to make sure that they include immigrants in this new initiative?
@all- I do understand how some of us are under whelmed by this IRS announcement however I believe that it will serve no good for us to turn on each other because of our differing evaluation.
We can’t lose sight of the fact that we remain united in having the U.S. Congress, the IRS and the U.S. Treasury as our common enemies.
@Em, regarding extricating yourself from your green card, I got my info from this site:
http://www.taxmeless.com/USCitizenRenounce.htm
@Petros: Markpinetree started his post with: “we should thank the IRS for finally starting listening to us”. This is like asking us to thank a serial rapist because his going to stop making us scream so much. Bravo. I realize that you want a diverse set of opinions here, but I am afraid I simply cannot let this kind of drivel go un-rebutted. Mark obviously does not think that the IRS’s actions are illegal or unjust, just a little misguided. It is the same kind of willful ignorance that Bush used to get the US to invade Iraq, and we know that that cost many, many good people their lives. That kind of idiocy simply doesn’t cut it anymore.
PS: and I do think Mark is a socialist despite his protestations otherwise.
@Christophe
Good question… You could just write the Commissioner and copy in Nina Olson!
BTW, I am sure you have found the report at Accounting Today. I have posted a couple comments as have others you will recognize. I put your issue under the “One disappointing note!”
@ConfederateH
Let’s not be so hard on Markpinetree. I understand where he comes from, and we should be respectful of his views even if we don’t agree with them. Let’s not characterize him!
I do agree, that just like Roger said elsewhere, “Won’t you step into my parlor said the spider to the fly”
Be very careful when entering their lair.
@Moby
Excellent comments…
I posted this over at Forbes in response to Charles Rettig
Your question is the BIG QUESTION that many minnows ask and struggle with…
As you know the IRS has discouraged quiet Disclosures QDs, and there is disagreement between practitioners if these minnows should be doing QDs at all. Some say yes, and some say no, and it is all fact dependent, of course. There was an active discussion between Tax attorneys on this issue recently here, if you are interested. http://bit.ly/Lfgo76
It appears to me that what the IRS is now doing, is creating an alternate Noisy Disclosure that is not the OVDI. It still leaves unanswered the question if a QD is a viable alternative, especially if this new program is “only” for non resident Expats. What does the poor Indian minnow immigrant do who has just discovered their failures to file an FBAR for a joint family account?
I think there will be more questions raised, as the broader outlines of this program become visible. I fear the IRS is again, using those very technical guidelines they like to use in FAQs, drawing “ compliance failure box” too narrowly and may create more problems than it solves, but we shall see.
PS… The Canadian voluntary disclosure program doesn’t need endless FAQs and technical adjustments, but the IRS just can’t learn from anyone else, apparently.
@ bubblebustin
“Regarding extricating yourself from your green card, I got my info from this site:
http://www.taxmeless.com/USCitizenRenounce.htm“
And that just illustrates the deep frustration we all feel when trying to get reliable, accurate information. I’ll let everyone know if I actually get a bill for $450 for submitting an I-407 but I doubt that I will. It’s a wonder that any of us have a hair on our head after entering the IRS morass of info, disinfo, misinfo and often via telehell. (Heh! There’s no number that applies to my situation! Hello, Hello … is there a real person I can talk to?)
Sorry Just Me, but I won’t let Mark and others like him off of the hook that easily. Why can’t we be completely honest here. It is the corrupt and illegal welfare state that has destroyed the private sector in the US and is now forced to resort to targeted theft from groups that have no representation and no voice in Congress or the government. Not only have I been forced to renounce my birthright, but I have been declared a “persona non grata” in the US and will likely never see my family again. My children still have the massive millstone of US personhood around their necks. And why? Because idiots like Markpinetree support the illegal and unconstitutional IRS and hope that Obama will do something about it now that he knows that he has been bad. Bwaaaaah! These people have been trading away our rights and liberties for their beloved welfare state for decades and have sold us out to the all-knowing elites that they so cherish. The US is heading for a break up and possible civil war because these idiots think they know better than those “racists” who wrote the constitution. And in the meantime they have dumbed down and brainwashed the youth of the country to such a degree that there is no hope outside of “dancing with the stars” for any significant change, short of a revolution. As far as I am concerned any expat-Democrat voter who ends up bankrupted, or even spending time, by the the IRS is getting what they deserve. Idiots.