From ‘Accounting Today‘ September 6, 2019:
The Internal Revenue Service outlined new procedures Friday to allow some expatriates who have relinquished their U.S. citizenship the chance to comply with their U.S. tax and filing obligations and in turn qualify for relief from back taxes, penalties and interest.
The Relief Procedures for Certain Former Citizens will apply only to individuals who haven’t filed U.S. tax returns as U.S. citizens or residents, owe a limited amount of back taxes to the U.S. government ($25,000 in the past six years), and have net assets of less than $2 million. Only those taxpayers whose previous compliance failures were non-willful can take advantage of the new procedures, according to the IRS. Many in this group may have lived outside the U.S. most of their lives and not been aware that they had U.S. tax obligations.
A post for Brock readers to analyze and discuss.
As well, analysis / commentary here:
IRS provides limited tax relief for certain individuals renounced(ing) after March 18, 2010
Update – My thoughts the Morning After – September 7, 2019:
After having digested this for a day (it was announced the afternoon of September 6/19, I offer the following thoughts:
I think that this IRS announcement/program has value. It may be that those who have renounced would NOT want to come into compliance (although there are certainly some who would – just to bring closure). But, the IRS announcement makes clear that this procedure is available to those who have not yet renounced/relinquished and wish to do so in the future. The point is that these future relinquishers can:
1. Come into tax compliance and have up to $25,000 USD in tax forgiven; and
2. Come into tax compliance without getting a Social Security number. This has the potential to be enormously helpful to a lot of people (but this is a minority view). It’s a way to make the compliance/renunciation process easier and less expensive (tax forgiveness) than it has been to date.
Of course, this will anger the thousands who have previously come into compliance, paid taxes and gone to the trouble of getting a Social Security number.
But, I can so how this new program has value.
Now on to the post as originally written …
Breaking news – just released today – September 6, 2019
Still head-scratching, 24+ hours later. Two possible explanations:
One: It’s a trap! In which case, don’t go anywhere near it.
Two: The US government just want to clear all the minnows off the books and say they’ve done something to help accidentals. In which case, given that the program does not require an SSN, and they will be receiving returns from people about whom they know nothing except possibly some FATCA data (sans SSN in many cases) I would assume that they will just rubber-stamp everything, send out the “you’re good” letters and toss it all in the bin afterwards. Also given that there would be no hope of collection from anyone entering this program – these are after all renunciants who’ve never filed US tax returns so by definition would be duals with no US assets or income – I really can’t see the IRS going through the pile with a fine-tooth comb, looking for violations or denying non-willfulness.
It certainly isn’t the case that the situation is always getting worse. The renunciation fee going up definitely sucked, but the deals from the IRS have consistently gotten better. From the dreadful OVDP to Streamlined and now this, Streamlined without SSN plus a $25k freebie on any taxes owed. Waiting may have paid off for some. It’s probably not insignificant that compliance rates post-FATCA haven’t increased much, and that relatively few people have used Streamlined, and very, very few got sucked into OVDP.
If indeed it’s going to be a rubber stamp, this may be a good window for those who’d prefer a “clean exit” letter with their CLN. File whatever the hell you want, provided it’s consistent with any known FATCA reporting. Five years of modest bourgeois income written off under the FEIE, some FBARs on a few bank accounts, a plausible 8854 and basta, you’re done. (I’m almost tempted myself. I don’t qualify because I did file returns for a few years when living in the US a century ago, but I doubt they’d be able to sort that out if I did this all without an SSN.)
@Pacifica777 Mea culpa! I was thinking of IRS 8854, not any of the DS forms.
Menno Snel, a Dutch politician serving as State Secretary for Finance, appears to be claiming some/all? responsibility for instigating this:
In mei sprak ik met Amerikaanse Belastingdienst
over de problemen die veel Nederlanders als gevolg van #FATCA. Voor hen nu een positief bericht: https://bit.ly/2m39LCm
In May I spoke with the American Tax Authorities
about the problems that many Dutch people have as a result of #FATCA . Now a positive message for them: https://bit.ly/2m39LCm
There are a number of tweets saying that it is not much of a change.
I think I have to go with Keith Redmond on this: it’s BS.
If I understand the scheme correctly, the people this new plan is apparently aiming to assist are those who renounced without sending the IRS their “final paperwork.” The type of people who have taken this route are probably very savvy about the whole issue and likely have no intention of interacting with the US in any way any longer. Why would they come forward NOW? Beats me.
That’s my view. They are doing something to make themselves look helpful in response to criticism from one or more EU governments. I’d be surprised if anyone who’s already renounced would actually take them up on the offer. But I can see the compliance industry jumping all over this “last, best chance to get out” and doing some good business with those considering renouncing.
Maybe a program for renunciants who are looking for closure (whatever that is)? Of course, if the IRS is true to form, they would never acknowledge they received the submission, let alone send a letter telling the taxpayer they were done forever, so there would still be no closure. Beats me, too.
I think the IRS lives in a different reality that makes sense to them but not to anybody else on the planet. By inventing this program, it suggests the IRS actually believes that people who have renounced still care about this stuff.
According to Q19 and Q20 on the FAQ, the IRS promises to send you a polite thank-you note within two months of submission.
I’ve just written a blog post on this IRS announcement: http://fixthetaxtreaty.org/2019/09/09/new-irs-relief-procedures/
OMG, is the IRS’ (and US lawmaker’s) approach going to be a process of elimination over the next 30 years before they realize that it’s not people fleeing the US to avoid paying US tax who are the ones renouncing US citizenship?
It’s almost as if someone at the IRS has been reading this and other forums, isn’t it?
Not that this is terribly complicated stuff to figure out.
PS The above dating to August, after the “soft letter” announcement.
One final thought, as the head-scratching is almost complete.
This isn’t really about anyone who has renounced already without coming into compliance. First, what’s the incentive, other than a nice letter one can frame and display above the fireplace? I suppose it avoids some mysterious future compliance campaign that will in all likelihood be completely toothless. Second, those numbers are going to be pretty small anyway – a percentage of the 30k or so who’ve renounced since FATCA (I could look up the total renunciations but it doesn’t need to be exact for this discussion). I suppose the program is back-dated to 2010 out of the need to appear “fair” in some sort of FATCA context.
Instead, this is about those who have not yet renounced, and is a political gesture to show that the US wants to make life easier for Accidentals. Whether any future renunciants decide to do this or not isn’t really the point. (In fact the program’s very existence might publicize the fact that it’s possible to renounce without compliance, and make that option more popular.)
It’s a bitter pill for someone who renounced and paid a sub-$25k tax bill – like those poor sweet law-abiding Dutch people on the TV report a few years ago – but I expect their numbers are extremely small. There might also be people currently filing and waiting to have 5 years before renouncing – if they have been badly advised, since they can of course backfile 5 years at once – who have missed out on this.
In addition to being a sop to the EU, maybe this head-scratcher of a program is simply the IRS’ response to the thousands of renunciation notifications received from the Department of State over the years that can’t be matched to any known tax filings. After the giant pile reached a certain height a middle level manager could have noticed and decided that they had to do something because why else would they get notified if they weren’t supposed to do something.
It undoubtedly reflects badly on management when they have a pile that is large and growing and no effort has been made to reduce that backlog. I wish them good luck (not).
I wish the IRS would give me $25K to pay the Transition Tax with.
Things just get better for those who stay out of the system.
“(In fact the program’s very existence might publicize the fact that it’s possible to renounce without compliance, and make that option more popular.)”
More than might. This is straight from the IRS’ announcement of the new program:
“Set by the Department of State, the U.S. consular fee for “Administrative Processing of Request for Certificate of Loss of Nationality” is $2,350, and the fee cannot be waived. Compliance with all U.S. income tax filings or obtaining a Social Security number is not a pre-condition to relinquishing citizenship under the Immigration and Nationality Act.”
So maybe what the IRS is really saying here is: “If you renounce and owe us less than 25,000 dollars, please just walk away. We lose money every time one of you sends us a giant stack of papers adding up to zero.”
It’s four-dimensional chess!
Could be. Everything a person would need to draw that conclusion is contained in the IRS announcement.
It’s taken us a few days to figure it out, but this explanation makes more sense than any other. It’s a coded message from the IRS: go ahead and renounce, but please don’t waste our time filing if there’s no money in it for us.
10 September 2019, Helen Burggraf, Tax Connections: “IRS Unveils Tax Breaks for Certain Former Citizens; Tax Experts Give Their Opinions
This suggests a new strategy for those who are being hounded by their bank for a SSN they don’t have and are threatened with account closure if they don’t provide it by Dec. 31.
They can now tell their bank they have applied at the Consulate to renounce and are waiting for an available appointment. Because of the fact that this new IRS program doesn’t require a SSN, there is absolutely no point in applying for one. They can tell their bank manager he obviously didn’t get the memo and can then wave a copy of the new IRS procedure under his nose as proof. Now that the IRS doesn’t care, why should the bank care?
Why not just admit you make a mistake? Overhaul it so it targets the people it was meant to target. Do not regret renouncing in Calgary for a minute. This just doesn’t go away and keeps getting sillier and sillier.
For people who have no ties to the US other than birth ,may not even speak the language,receive no tangible benefits ,to toss out some silly enticements while still requiring six years income tax forms to a FOREIGN country and the strawberry-on- the-sundae extortion fee. Is simply ludicrous. The fee alone is criminal .Some folks here seem to to consider that fee the equivalent of a bus token. For shame !
There’s no way the US government (and the IRS) would ever admit they were the cause of so much misery and hardship over the years. Instead of a simple goodbye and good luck, they are compelled to create yet another “procedure”. Its just the way they think and work. The whole business, including the extortionate fee has been a criminal enterprise, but they now know the jig is up.
People everywhere have figured out that once they have renounced, all the rest can be safely ignored, and this latest development confirms that. A tax filing without a SSN is totally useless. They will probably wind up throwing them all in the garbage.
Even if filling w/o a ssn seems useless , it really isn’t since someone who has never filed will be sufficiently enticed ,perhaps by a condor, to cough up the $2300 usd to renounce. Don’t forget that comes from someone who has never nor would ever otherwise contributed to the US economy..
Is’nt that like money raining from the sky ? Now, that is anything but useless.The whole idea is to pull in money.
That $2350 renunciation fee might be the price a person needs to pay to keep their investment options open, or even keep their job, unfortunately. In some countries the US-born won’t get far without a CLN.
Tax is a different issue. They still don’t need to bother filing any tax returns, even without an SSN.