IRS announces new procedures to enable certain expatriated individuals a way to come into compliance with their U.S. tax and filing obligations

October 22, 2019by Frontier Group

The Internal Revenue Service has recently announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

The new Relief Procedure only applies to individuals who have not filed US tax returns as US citizens or residents, owe a limited amount of delinquent US taxes and have net assets of less than $2 million. Relief can only be obtained by individuals who were non-wilful with their past compliance failures. This is common for taxpayers who have lived outside the US for the majority of their lives and were unaware of their US tax filing obligations.

Individuals that qualify on this basis must file outstanding US tax returns for the five years preceding and their year of expatriation. If the taxpayer’s liability does not exceed a total of $25,000 for the six years, the taxpayer does not have to pay any US taxes. The aim of these procedures is to provide certain former citizens with tax relief. Penalties and interest are not assessed on individuals who qualify for this relief.

The IRS are yet to set a specific termination date and will announce this prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible so long as they satisfy the other criteria of the procedures.

Estates, trusts, corporations, partnerships and other entities are not entitled to use these procedures as it is only available to individuals.

Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irreversible decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime.

Please feel free to contact us should you have any queries regarding the above and we would be delighted to assist you.

Frontier Group