As promised, the IRS has implemented streamlined filing compliance procedures for nonresident U.S. taxpayers considered “low-risk” and who have not filed income tax returns and FBARs. The program, effective September 1, Protected content an expedited review, with no penalties for qualifying taxpayers. For those taxpayers who would like a streamlined review, a new questionnaire must be completed and new instructions provided by the IRS must be followed.
Here is how the program works. U.S. Taxpayers who have lived abroad since Protected content have not filed U.S. income tax returns during that period may participate if they are deemed “low-risk”. The taxpayers must submit three years of federal income tax returns and six years of FBARs. Valid taxpayer identification numbers must be included on all returns. Returns with less than $1,500 in taxes due each year will fall into the low-risk category resulting in less scrutiny, expedited reviews, and no penalties. Taxpayers who owe more than $1,500 in tax each year can still qualify but will undergo a more thorough review by the IRS.
Taxpayers would be considered high-risk if one or more of the following factors apply:
• A return claims a refund
• The taxpayer is under IRS audit or investigation
• The taxpayer has received a FBAR warning letter
• The taxpayer has a financial interest in an account or entity outside his or her country of residence
• There is U.S. source income or material economic activity
• The taxpayer engaged in sophisticated tax planning or avoidance
Some critics of the streamlined procedures believe that the qualifications for low-risk status are too strict and that few taxpayers will be able to take advantage of the program.
The streamlined program does not provide criminal prosecution protection. If that is a concern, the IRS recommends taxpayers consider the Offshore Voluntary Disclosure Program (OVDP). If you have questions or concerns related to nonresident filing, please contact James C. Sexton, Jr. at Esquire Group for a consultation.
Please contact James C. Sexton, Jr. with questions or comments.