IRS Announces Efforts to Help U.S. Citizens Overseas Including Dual Citizens and Those with Foreign Retirement Plans


By Cynthia Hoffman

The Internal Revenue Service recently announced a plan to help U.S. citizens residing overseas, including dual citizens, catch up with tax filing obligations and provide assistance for people with foreign retirement plan issues.

The IRS is aware that some U.S. taxpayers living abroad have failed to file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs) in a timely manner. Some of these taxpayers have recently become aware of their filing requirements and want to comply with the law.

The new procedure will allow such taxpayers who are low-compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns and owe $1,500 or less in tax for any of the covered years. The new procedure will go into effect on September 1, 2012.

The IRS also announced that the new procedures will allow resolution of certain issues related to certain foreign retirement plans (such as Canadian Registered Retirement Savings Plans). In some circumstances, tax treaties allow for income deferral under U.S. tax law, but only if an election is made on a timely basis. The streamlined procedures will be made available to resolve low-compliance-risk situations, even though this election was not made on a timely basis.

Taxpayers who wish to take advantage of these new procedures will be required to file delinquent tax returns along with appropriate related information returns for the past three years, and to file delinquent FBARs for the past six years. Submissions from taxpayers who present higher compliance risk will be subject to a more thorough review and, potentially, an audit, which could cover more than three tax years.

Details of the procedures still need to be finalized and released by the IRS. Schneider Downs & Co., Inc. will keep you informed of further statements on this issue.

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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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