Liberty and justice for all United States persons abroad

The Isaac Brock Society

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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
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), Form TD F 90-22.1.  Some of these taxpayers have recently become aware of their filing obligations and now seek to come into compliance with the law.  The Service is announcing a new procedure for current non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns to file their delinquent returns.  This procedure will go into effect on Sept. 1, 2012.Description of proposed new procedure:

While more details will be forthcoming, taxpayers utilizing the new procedure will be required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent FBARs for the past six years.  All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission.  For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions.  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.

Tax, interest and penalties, if appropriate, will be imposed in accordance with U.S. federal tax laws based on a review of the submission.  For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13 (December 2011) at www.irs.gov.

In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by relevant treaty will be available through this process.  The proper deferral elections with respect to such arrangements must be made with the submission.

Compliance risk determination:

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.

How taxpayers will be able to take advantage of the new procedure:

Taxpayers wishing to use the new procedure will be required to submit: (1) delinquent tax returns, with appropriate related information returns, for the past three years, (2) delinquent FBARs for the past six years, and (3) any additional information regarding compliance risk factors required by future instructions.  Payment of any federal tax and interest due must accompany the submission.  More information about the application process including where submissions should be sent, will be provided prior to the effective date.

Any taxpayer claiming reasonable cause for failure to file tax returns, information returns, or FBARs will be required to submit a dated statement, signed under penalties of perjury, explaining why there is reasonable cause for previous failures to file.  See IRS Fact Sheet FS-2011-13 (December 2011) at www.irs.gov for examples of reasonable cause.  Any taxpayer seeking relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty will be required to submit:

  • a statement requesting an extension of time to make an election to defer income tax and identifying the pertinent treaty position;
  • for relevant Canadian plans, a Form 8891 for each tax year and description of the type of plan covered by the submission; and
  • a statement describing:
    • the events that led to the failure to make the election,
    • the events that led to the discovery of the failure, and
    • if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities.

Other considerations:

Taxpayers who are in a situation where they are concerned about the risk of criminal prosecution should be advised that this new procedure does not provide protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer’s particular circumstances warrant such prosecution.  Taxpayers concerned about criminal prosecution because of their particular circumstances should be aware of and consult their legal advisers about the Offshore Voluntary Disclosure Program (OVDP), announced on January 9, 2012, which offers another means by which taxpayers with undisclosed offshore accounts may become compliant.  For additional information about the OVDP,  see www.irs.gov.  It should be noted, however, that once a taxpayer makes a submission under the new procedure described in this document, OVDP is no longer available.  It should also be noted that taxpayers who are ineligible to participate in OVDP are also ineligible to participate in this procedure.

Anyone interested in using this procedure should be aware that all tax returns must have a valid Taxpayer Identification Number (TIN).  For U.S. citizens, a TIN is a Social Security Number (SSN).  For individuals that are not eligible for an SSN, an Individual Taxpayer Identification Number (ITIN) is a valid TIN. Tax returns filed without a valid SSN or ITIN will not be processed.  For information on obtaining an SSN,  see www.ssa.gov.  For information on obtaining an ITIN, see www.irs.gov.


 


87 thoughts on “IRS Announces Efforts to Help U. S. Citizens Overseas Including Dual Citizens and Those with Foreign Retirement Plans”

  1.  “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.”

    Name calling doesn’t help anybody. Democrats and Republicans are equally to blame for this mess and for the dysfunctional US congress. Let’s stick to the agenda of the IBS which is to combat the IRS

  2. I too feel Confederate is unfairly characterized our friend MarkPinetree. Thouse of us in the process of becoming compliant and/or relinquish US citizenship, it is better than what we had before. To a person suffering from thirst, even 15% glass full is better than nothing (i.e. 85% empty is better than 100% empty). Based on once perception and personal situation, one may feel it is anywhere between 5% full to 40% full. To the people who are scared or feeling helpless some thing is better than nothing to fix the innocent mistake like not knowing about FBAR.

    Of course, the devil is in details. I hope the details wouldn’t set a trap. The IRS is already deeply mistrusted by legal practitioners due to its ‘bait-and-switch’ in OVDI and deliberately ignoring TAS directive.

     

  3. @ConfederateH- I’m sorry but you will have a hard time pointing to any Republican opposition to this whole mess. Even Speaker Boehner(R) was supportive of bill that was formulated Schumer and Casey.  Do you really think that FATCA even passed without garnering Repbulican support.  Neither of the two parties is a friend to expats.  If anything the Republicans are just as convinced of our treachery as are the Democrats.

    I should point out that the Republicans have had just as much of a hand in building the welfare state as have the Democrats.  But more importantly America’s policy of extraterritorial taxation does not exist because of Socialism but because of American narcissism.  America believes that it can do what it wants when it wants.  Other countries don’t count.  This attitude towards the rest of the world runs through both parties.  Just look at the recently signed National Defense Authorization Act.  Do you think that this bill which empowers the President with the authority to summarily execute U.S. citizens without the benefit of trial or to indefinitely detain them, didn’t get passed without Repbulican support.?

    As an expat you will only find open support from those members of Congress who have Libertarian leanings.

    We have no friends in the U.S. All of our support comes from our countries of residence.

  4. As far as I can see these new “amnesty” procedures, with all the serious limitations and faults that others have commented on above, are aimed at former US persons living overseas who wish to remain US citizens. Even for those people the “benefits” are questionable, even in the immediate term never mind the long term.

    I don’t see anything here of any comfort, use or benefit to anyone who relinquished their USC decades ago, whether or not they apply for a CLN, nor to anyone who renounces today (or in the past few months, or in the near future), nor to “accidental” (I prefer the term “unwilling”) Americans born on US soil or off US soil of US parents. Moreover there is nothing in this announcement that changes FATCA one whit, relieves the financial privacy threats to alleged US persons residing outside the US, changes the extraterritorial and imperialist application of US laws in other countries, nor does anything to protect present or former US persons in countries such as Switzerland from having their bank and investment accounts closed, their mortgages cancelled, and being treated as pariahs even if they have citizenship in those countries.

    This doesn’t begin to address or redress the damage already done or about to be done to alleged US persons living outside the US (not to mention their non-USC spouses) and with minimal or no US involvement for years, by its imperialist, overweening, money-grabbing government.

    At least not as far as I can see.

  5. Has anyone here ever used SAMS (Systemic Advocacy Management System (SAMS)) to complain to the National Tax Advocate about FBARS, FATCA, etc? I am reading the NTAs recommendations to congress and she mentioned that the number of submissions had increased three-fold in a 3 year period, but the number of submissions are still pitiful (27 last year). Does anyone know anything about this SAMS system?

  6. I did regarding OVDI. Never got an answer.
    I called them again today and they told me my only option was OVDI.
    I filed another one yesterday, complaining that the new guidance does not include immigrants.
    I received an acknoledge email today, saying they’ll get back to me within 3 months.

  7. @Christophe You used the SAMS system for this? The website for SAMS says that the system is for ‘systemic’ issues that affect many people – not individual tax issues. Sorry for my confusion.

    It just seems to me that if there is a system for people to complain about systemic problems with the IRS, we should be absolutely flooding SAMS with input. The fact that they received 27 queries last year seems wrong on many levels.

  8. Yes. Foreign accounts non compliance affect millions of expats and immigrants. I would say it’s a systemic issue which could have potential dramatic financial hardship. I thought it was appropriate to communicate with them this way. I did not explain my specific situation but made them understand that it was affecting a large number of taxpayers. I thought this was an appropriate channel to provide feedback.

    When I first realize I was not compliant, I tried to get in touch with the IRS to see if there was another option than OVDI for minnows. The only live person I could talk to was a CI, which was nice and understanding, but did not want to provide any advice, saying that there was no other solution than OVDI, if you owed even the smallest amount of taxes.
    You can’t reach the OVDP hotline and talk to someone anonymously. You get an automated message saying that you need to leave your name and number and they’ll call you back. So I tried SAMS. Maybe if more people would do it, we might see things moving. It might be nice if other immigrants reading this forum would do the same. If they get thousands of requests to address the issue for immigrants, they’ll see that this is a systemic issue.

  9. @Christophe

    This is exactly why I was asking about it. Is this SAMS something most people don’t know about? If so, perhaps we need to make people aware of it. I would like to think we could improve on the number of submissions made in 2011 (only 27, according to the report from the NTA sent to congress).

    I’m sorry to hear that you have been scooped up in the OVDI nightmare. What a mess.

  10. @ConfederateH

    Sorry ConfederateH…. I understand you have strong feelings, as do many of us here, but while I will characterize a lot about the IRS processes, and Congress as an institution that does stupid things, I will not direct that name calling personally against someone I have never met except through participation here.   I will save that type of name calling to something I do to their face, if I have the balls, but frankly when I meet such a person that I might strongly disagree with, I find it exceedingly difficult to be that insulting.  Face to face communication over anonymous blog posting does temper your responses. As it should!  

    So, I won’t call you a name, and let’s try to refrain from calling Markpinetree names.  Now if you want to call the collective body of Congress, Idiots when it comes to Citizenship taxation, I am right there with you!  LOL

  11. @Expat in the UK, Well, I did not enter the program, but would like to fix past compliance issues, as in my case, I am married to an American. I didn’t get naturalized yet, don’t know if I ever will. But I definitely don’t want to get deported and  break my family for something I didn’t even know I had to do.
    Some lawyers and articles I read online scared me about the threat of deportation saying I should enter OVDI, saying that’s the safest way to avoid future immigration issues. But given how much it would cost for a small amount of backtaxes due, I refused to submit myself to this robbery.
    My wife doesn’t speak French, not really willing to learn and is not excited to say the least about potentially moving. And there are 2 kids added to the mix. Potential immigration issues are the main reason I want to fix the past but not at the OVDI cost. It just kills me there’s nothing I can do. I hate that.

  12. For those that follow what the TAS has to say, they have just released their 2013 report to Congress

    National Taxpayer Advocate (NTA) Nina E. Olson released her Fiscal Year 2013 Objectives Report to Congress on June 27, 2012, which identifies the priority issues and challenges for the upcoming fiscal year. The report expresses particular concern about the taxpayer impact of expired and expiring tax provisions, the rise in tax fraud and tax-related identity theft, and attempts to limit the NTA’s formal input on issues that affect taxpayer rights and taxpayer burden

  13. @justme, it’s not encouraging that the NTA is having to fight to keep her ground. But then, if her words are being ignored, what is her function? One of the few voices of sanity within the government fading…

  14. @Expat in the UK, @Christophe,

    You can find some info on SAMS in comments on this link: http://isaacbrocksociety.ca/2012/04/06/civil-disobedience-in-the-face-of-desperate-government-john-rubino-video/comment-page-1/#comments 

    @Badger, @All,

    The latest is disheartening.  I am away from home and do not have good access to the internet right now.  Thanks Badger for all you have commented on about the discrimination we all continue to face regarding registered accounts in Canada and other countries. 

    Will check in again when I am back home.  

  15. @justme- The NTA was never meant to be nothing more than a “token” position. The office has no power to effect changes in IRS policy and it is even under the IRS Commissioner. All bark and no bite was never a more true appraisal of any office than it is of this one.

    Its mandate can be summed up with these words- keep your mouth shut and don’t make too much noise.

  17. @Recalcitrantexpat..

    That report is a good read, and gives some perspectives on the difficulties the NTA has being both and insider and outsider. The author thinks that Nina has done an excellent job balancing those opposing requirements.  I also see why she will never be considered for a replacement for Shulman, but law she can not be considered for and IRS position until after 5 years of leaving the NTA. 

    mvh

  18. @justme- thanks for finding that report. I am going to read it over myself. I personally don’t believe that the advocate can be effective when the office is within the IRS and when it lacks any power to change IRS practise.

    One of the worst proposals that I read regarding the NTA involved the IRS Commissioner appointing the Advocate. I can’t imagine anything that would be worse but it is probably closer to what many in Washington believe the NTA is suppose to be.

  20. Christophe

    Maybe you can point them to the TAS report which the NTA mentions that she regards foreign account cases as a systemic problem ? That should be enough for them to consider it a systemic issue ?

    *

  21. @Expat in the UK:

    Thanks for posting the link to the Highway Bill.

    As I understand it, the “Conference Agreement” between the House and the Senate does not include the “Senate amendment provision”. This means that “Present Law” remains in place, as outlined on p. 55. Of course, Harry Reid can propose the “Revocation or Denial of Passport in Case of Certain Unpaid Taxes” provision again at any time in another bill.

     

  22. @Expat in the UK, let’s not spread false information and entertain fear.
    You said: “the Senate has been working on HR4348 which will revoke or deny passports to those owing unpaid taxes.“

    The PDF says (page55): “State may refuse to issue or renew a passport if the applicant owes child support in excess of $2,500 or owes certain types of Federal debts, such as expenses incurred in providing assistance to an applicant to return to the United States. The scope of this authority does not extend to rejection or revocation of a passport on the basis of delinquent Federal taxes. Issuance of a passport does not require the applicant to provide a social security number or taxpayer identification number.”

    It explicitly says that your passport won’t be denied if you owe taxes, just if you owe child support. That’s different.

  23. Amy Feldman of Reuters has posted a story on this new program under the title of…

    New IRS rules for disclosure of foreign assets

    I have posted a comment which just came out of moderation, and there is one other.  I would encourage Brockers or Immigrants who would like to register their request for “relief” to also post a comment.  Amy understands the issues, and has written about Expats before, so don’t miss this opportunity to help shape a narrative..  

  24. The only way that a US person is going to get a pass from the IRS is if the US person doesn’t have what the IRS wants: money.

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