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Breaking news!! IRS releases details of new procedures for non-compliant taxpayers living abroad

As discussed in our June 28, 2012 blog, the Internal Revenue Service (“IRS”) previously announced new procedures that will enable non-resident US taxpayers who demonstrate “low compliance risk” to bring unfiled tax returns and related tax reporting obligations current and avoid potentially ruinous penalties. This afternoon the IRS released details regarding the new program for non-residents (such as Americans living in Canada) to get compliant with past tax obligations. We’ll have a more detailed analysis on Tuesday, but for now here are a few highlights:

  • Persons qualifying for, submitting under the new “Streamlined Filing Procedure,” and presenting a low compliance risk will not have to pay penalties or face follow-up review by the IRS.
    • To qualify, you must be a non-resident US taxpayer who has lived outside of the US since January 1, 2009 and has not filed a US return since.
    • To participate, taxpayers must file three years of tax returns and information returns along with six years of “FBARs.” Tax and interest must be paid at the time of filing. A valid Taxpayer Identification Number or Social Security Number is required.
    • The determination of compliance risk is based on a large number of factors and the answers to a special questionnaire required as part of the submission.
  • Generally, amended returns will not be accepted in this program. Where they are, the amended returns will be considered “high risk” and subject to increased scrutiny.
  • Retroactive relief for deferral on Canadian retirement plans is available.
  • The Streamlined Filing Procedure does not protect against the risk of criminal prosecution.

The full text of today’s announcement is available here.