U.S. citizens who have relinquished their citizenship but have not complied with prior U.S. tax law filing requirements may think they are out of the country and off the hook. It may be years from now the IRS catches up with you and you are now faced with back taxes, penalties, and interest. Fortunately, the IRS has now implemented a program of relief procedures for certain expatriated individuals that offers a way for those individuals to come into compliance with their U.S. tax and filing requirements.
Only taxpayers whose past compliance failures were due to non-willful conduct may use these procedures. All the following criteria must be met.
- You have relinquished your U.S. citizenship after March 18, 2010.
- You have no filing history as a U.S. citizen or resident;
- You did not exceed the threshold in IRC 877(a)(2)(A), related to average annual net income tax for the period of 5 tax years ending before your date of expatriation;
- Your net worth is less than $2,000,000 at the time of expatriation and at the time of making your submission under these procedures;
- You have an aggregate total tax liability of $25,000 or less for the five tax years preceding expatriation and in the year of expatriation (after application of all applicable deductions, exclusions, exemptions and credits, including foreign tax credits, but excluding the application of IRC 877A and excluding any penalties and interest).
- You agree to complete and submit with your submission all required Federal tax returns for the six tax years at issue, including all required schedules and information returns. See FAQs 11, 12, and 16 for information on how to complete these returns.
Only taxpayers whose past compliance failures were due to non-willful conduct may use these procedures. All eligibility criteria must be strictly met to use these procedures.
If you qualify for these procedures, the IRS should not charge any penalties. Moreover, the IRS will not make you pay the tax due on the tax returns. If you file and the IRS determines you do not qualify under these procedures, you will be subject to the tax liability and any penalties and interest associated. Please be sure to consult with a qualified tax professional. This information is general in nature and should not be relied on.
Please contact a qualified tax professional with any questions.
Jill A. Helm, CPA