IRS Announces Procedures for Nonresident Citizen Filing of Delinquent Returns


By Cynthia Hoffman

The IRS recently announced new streamlined filing procedures for nonresident citizens who have been living overseas and were not aware of their U.S. filing obligations.These procedures, which were first announced on June 26 went into effect on September 1, 2012. These procedures are being implemented to assist taxpayers in coming into compliance with the law on filing delinquent information tax returns, such as Forms 5471, 3520, and Form TD F 90-22.1 (FBAR’s).

The procedure is designed for taxpayers who present a low compliance risk. The taxpayer will be required to file delinquent tax returns, with the appropriate related information returns, for the past three years, and to file delinquent FBARs for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns.

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

The procedure is available for nonresident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax return during the same period. The IRS will determine the level of compliance risk presented by the taxpayer submission based on information provided on the returns and provided on a questionnaire that is required as part of the submission. Low-risk returns, those returns with little (less than $1,500) or no U.S. tax due in each of the years, will be processed in a streamlined manner. The questionnaire can be found on the IRS website. Returns and the related questionnaire should be filed as directed in the procedure.

The 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.

For taxpayers who do not qualify for this new procedure, relief is available under the Offshore Voluntary Disclosure Program.

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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter

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