For those waiting for further analysis on the new IRS Instructions [Published on Friday, 07 September 2012 15:59 Written by Roy A. Berg JD, LL.M. (US Tax)]
If you are a US person residing in Canada and are one of the unfortunate few who does not have a graduate degree in US tax and who is not related to a cross-border US tax professional you may have missed filing one of the myriad of tax forms that are required every year (the failure to file of which can carry dire penalties). If this is the case, the IRS may have a new streamlined procedure just for you. The bad news is that few will likely qualify and those who do not qualify face serious consequences just for applying.
The new streamlined procedure went into effect on September 1, 2012. Click here to see the full text of the streamlined procedure. The program is designed for expats with simple returns and little or no tax due. But whether by design or defect, it threatens to entrap most of its likely applicants. For those who qualify, the new program may be a breeze. But for those who do not, and we suspect most expats will not, the streamlined procedure is a lot like a lobster pot – easy to get into, hard to live in, and harder to escape
Moodys Further Analysis: Completing the Questionnaire, or Entering the Lobster Pot.
Unfortunately the IRS has not given guidance as to which of the above-listed risk factors or combination thereof, will increase the taxpayer’s compliance risk, and therefore disqualify him from the streamlined procedure. Further, the questionnaire raises a number of extremely serious issues of which every taxpayer considering this procedure should be aware.
I presume our Charter of Rights and Freedoms is being turned into a piece of toilet paper just like Obama is doing with the Constitution.
Wonder if there is another thread for your data sharing information too. It is important, on many levels, but almost seems lost / orphaned here? 🙂 BIG DATA is tracking you and your residency overstays!
I put the link here as a relevant part of the discussion but will find more spots for it too, thanks for the suggestion (and headline).
Any fast breaking news on Canada’s position on FATCA?*
What is the risk for a person born in Canada in the 1970s but who 10 years ago while living in Canada took out US citizenship, had a US passport, was born to US parents and has two children? Still lives in Canada. One would assume her children are US citizens and that FATCA applies to her and her husbands joint accounts. One would assume that she cannot relinquish but could renounce with the risk of exit taxation. Besides this are there any other worries?
@ John Green,
So, from what you present, the children are probably safe from US citizenship.
Yes, FATCA applies; yes, applies for her and her husband`s joint accounts, as does FBAR and required compliance with US tax returns. You`re correct, renunciation would be the only route out, then the 8854 with the final US tax return.
I’m posting this here since there has been no publicly accessible information about how the ‘Streamlined’ filing compliance option has been applied, or how it has been working out for those who submitted under it since it became in force September 1st, 2012. The page is not forma guidance on which US taxpayers can rely. I am not posting it as tax advice. I merely note that this appears to have been updated recently.
The IRS FAQ page re the Streamlined Compliance program has now a ‘last reviewed or updated’ date of February 27, 2013. Although as the Taxpayer Advocate noted repeatedly, the taxpayer cannot depend on IRS FAQs as ‘formal guidance on which taxpayers can rely’, as opposed to the authority of the contents of the IRM, these FAQs may provide something of an indication of the current IRS public face, ex. re moving from the OVD programs to being considered under the Streamlined process – if one’s case is deemed to be low risk, etc. It also appears to indicate the possibility of an option for reconsideration for those who had already signed a Form 906 and had their VD cases closed ( see Q5). I haven’t a firm idea of exactly when the FAQs were revised, or what revisions were made. I simply note that a recent updating was done:
For the original webpage, see http://www.irs.gov/Individuals/International-Taxpayers/FAQReStreamlinedFilingComplianceProceduresNRNFTPs
I’ve copied and pasted the contents below, but as they could change at any time, you can’t rely on this, and must visit the page to see any further revisions.
‘Frequently Asked Questions Regarding the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayers’
1. One of the risk factors listed in the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayers Questionnaire is a tax liability below $1,500 for each of the three years submitted under the Streamlined Procedures. If my tax liability exceeds $1,500 for any of the three years, am I ineligible?
No. The $1,500 per year tax limit will not disqualify you from admission to the Streamlined Procedures, but exceeding that limit may result in your submission being treated as higher risk. The instructions for the Streamlined Procedures state that low risk will be predicated on simple returns with little or no U.S. tax due. Submissions with tax due of $1,500 or less will be considered low risk absent any risk factors. Submissions with tax due in excess of $1,500 or the presence of other risk factors may be treated as higher risk.
2. If I submit a return with tax in excess of $1,500 and I am determined to be higher risk, what are the consequences?
Submissions determined to be higher risk due to tax amounts over $1,500 or the presence of other risk factors may be subject to applicable penalties. Submissions determined to be higher risk may also be subject to an examination. If you have a submission presenting higher risk, you may consider filing under the Offshore Voluntary Disclosure Program.
3. If I have already been accepted into the 2011 Offshore Voluntary Disclosure Initiative but I qualify for the Streamlined Procedures, can I request the Streamlined Procedures?
Yes. If you qualify for the Streamlined Procedures but have been accepted into one of the offshore voluntary disclosure programs prior to September 1, 2012, you may opt out of the offshore voluntary disclosure program and request the Streamlined Procedures. To opt out, you need to inform the examiner of your decision in writing. This is an irrevocable election and you will receive a notification letter stating this fact. The examiner assigned to your case will then be able to make a risk determination of your submission and close your case according to the Streamlined Procedures. If all submission items for the voluntary disclosure program have already been submitted to the IRS, you will not be required to make a second submission for the Streamlined Procedures.
4. If I elect to opt out of one of the offshore voluntary disclosure programs for the Streamlined Procedures, how will my submission be considered?
Under the offshore voluntary disclosure programs, you were required to submit tax and information returns for a period of years. If you qualify for the Streamlined Procedures, the IRS will review all of the returns that you previously submitted through one of the programs. If your submission is determined to be low risk, you will not be subject to any applicable penalties. However, if your submission is determined to be higher risk, you may be subject to applicable penalties and your returns may be subject to examination.
5. If I qualify for the Streamlined Procedures, but I previously participated in one of the offshore voluntary disclosure programs and entered into a closing agreement, can I now have my case reconsidered under the Streamlined Procedures?
Taxpayers who participated in one of the offshore voluntary disclosure programs whose cases have been resolved and closed with a Form 906 closing agreement and who believe the facts of their case qualify them for the Streamlined Procedures should provide a statement to this effect, including all pertinent contact information (name, address, SSN, home/cell phone numbers), the name of the Revenue Agent assigned to their case, and a copy of their closing agreement. This information should be sent to:
Internal Revenue Service
3651 S. I H 35 Stop 4301 AUSC
Austin, TX 78741
Attn: Streamlined Redetermination
Upon receipt of this information, the case will be assigned to an examiner to review and make a determination whether the case should be reconsidered, based on all the facts and circumstances.
6. To submit complete and accurate tax returns under the Streamlined Procedures, what income tax return form should I use?
Taxpayers should use Form 1040, U.S. Individual Income Tax Return, except that taxpayers who are submitting amended returns for the sole purpose of submitting late-filed Forms 8891 should use Form 1040X, Amended U.S. Individual Income Tax Return. Use of any other forms (for example, Form 1040NR, U.S. Nonresident Alien Income Tax Return, when the taxpayer is not a nonresident alien) may result in significant delays or exclusion from the Streamlined Procedures.
Page Last Reviewed or Updated: 27-Feb-2013
Update on the Streamlined Return choice:
Three Important Changes to IRS Streamlined Filing Procedures for US Taxpayers Resident in Canada
1) is not really new.
3) is interesting… Are they afraid of lawsuits from people who got huge in lieu of penalty in the previous years programs.
And still nothing for immigrants to the US. It is frustrating that they slightly modify or add certain rules, but don’t do anything with Nina Olson’s recommendations. Just plain depressing. Maybe they don’t do anything because there is an acting commissioner right now.
When are we going to get a new commissionner who might listen? It is rather irresponsible to delay the apointment of a new commissioner given all the challenges that the IRS is currenly having. I hope that when we’ll have one, Nina will go at it again and try to get her recommendations implemented. What she’s doing is great. But what’s the point if they don’t listen to her.
Phil Hodgen says his (very brief) piece on Stealing From Canadian Grandmothers. Nothing technical, but basically the same attitude that has been expressed by others:
I am posting this here, and at a more recent IBS thread, because it appears that there may have been significant enough changes to the original guidelines of the Streamlined program as to include people who previously didn’t seem to fit the criteria, or who were/are in the OVD programs and sought to have their cases considered under the Streamlined process. It seems as if this may be an ongoing development due to pressure from the Taxpayer Advocate. At this time, it is hard to say where any of this information is, or whether it might be available to the ordinary taxpayer ‘abroad’ struggling with this, other than by contacting the Taxpayer Advocate Services.
Significantly, it appears that the Taxpayer Advocate has been working on this, and it is worth knowing from the commenter, that some (many, most?) /examiners may not be current with the changes that are evolving in a more advantageous direction for those seeking to come into compliance without being obliterated – including those stuck at various places along the way – ex. OVDI.
Not enough details yet, and must read the whole entry, but so very generously, a commenter on Jack Townsend’s site shared:
“…………OVDI participants and many tax attorneys will want to know. The news is that the Streamlined Program policy is changing again. It is very much to the favor of OVDI participants. It seems that they are being given the chance to enter the Streamlined Program on the basis of the same years as new Streamlined Program participants…………..””
@anon5percent was generous enough to alert us and share that information on Jack Townsend’s site:
This from the
NTA report, comes as a surprise to me, but I admittedly had not gone back and read the “Streamlined” FAQs since it first came out… My fault.
Did anyone see an official press release or notice that they had really changed the conditions of the Streamlined program, or were you just supposed to check daily to see if something new had been posted… I had heard hints that IRS officials at conferences had said that if you exceed the $1500 limit go ahead and to go ahead and submit to the streamlined, but I did NOT realize that they had actually changed the rules as shown below.
Note 7 says…
@ Just Me – I was in the system opting out into Streamlined Program and I did not even know where to find all information on it. Apparently, neither do IRS Revenue Agents, nor especially, Collections Agents.
What even makes me angrier is that at the bottom, it is stated that taxpayers who have participated in previous programs can apply under the new terms and conditions. Do you really think people like the victim Patricia Anderson d’Addario are reading these websites? How would she know to reapply? Lawyers don’t do anything for you if you are not paying them. Even my examiner told me the goal was to get me out of the program and never hear from me again. Why would I want to continue reading about IRS programs if I am done? Where is the Outreach from the IRS? A small gesture like a letter to all OVD participants to let them know their circumstances can be reconsidered under the new programs would generate some good will. Otherwise, the policy appears to be a token one with no real meat behind it.
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