We are very pleased to announce that we have received some further guidance from the IRS concerning back filing and delinquent accounts of U.S. citizens residing outside the United States. We caution our U.S.-Canada cross-border tax clients that this does not mean that you don’t have to worry about filing timely tax or information returns but rather it gives taxpayers an opportunity to get caught up.
Who does this IRS tax assistance apply to?
The IRS has given US tax accountants and tax advisors like Aylett Grant Tax LLP, new procedures enabling U.S. citizens and taxpayers residing overseas (cross-border taxpayers), including dual citizens to file back tax returns and other filing obligations.
- U.S. citizens
- U.S. dual citizens
- U.S. taxpayers (does not specifically mention green card holders or people meeting the substantial presence test and this would have to be looked into further)
What do the new procedures look like?
While details have not been finalized it appears to be based on the following logic according to a recent release concerning the new IRS. “Today we are announcing a series of common-sense steps to help U.S. citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.
The IRS is currently contemplating the following. Taxpayers utilizing the new procedure 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. It is important to note that the IRS has noted that all submissions will be reviewed and the appropriate level of scrutiny will be applied and the IRS has full rights to increase the required number of years of back filing.
What type of penalties can be imposed?
Tax, interest and penalties will be applied, if applicable, in accordance with U.S. Federal tax laws following review of the tax filing submission. We will follow-up with another article detailing out the various penalties and how they are calculated in the case of U.S. citizens residing abroad.
What are the implications for retirement and educational savings plans?
Notwithstanding the above the new guidelines provide an income deferral of certain retirement and education savings plans permitted by the relevant treaty provisions are also available through this process. What is important is to make sure that the proper deferral elections are filed with the submissions by U.S. citizens residing abroad.
How a taxpayer will be able to take advantage of the new procedure?
The submission that are to be sent by U.S. citizens residing overseas to the IRS should include:
(a) the actual delinquent tax returns – remember there are the related information returns,
(b) delinquent FBAR,
(c) any additional information regarding compliance risks factors,
(d) payment of taxes and interest,
There appears to be some discussions concerning the appropriate address that the submission should be sent to. Please contact our office for further details as the above list information has not been finalized. Also we will be looking for further clarification on what information will be needed to be sent to Department of Treasury versus the IRS.
General considerations
It is important that U.S. citizens residing overseas and contemplating back filing should seek the advice of an experienced U.S. and Canadian tax accountant or advisor who has extensive experience in U.S. and Canadian tax preparation depending on the uniqueness of each taxpayer’s situation. Also reasonable cause letters need to be considered when making any submissions. It is important to keep in mind that there was a revised Offshore Voluntary Disclosure Program or OVDP which was announced on January 9, 2012, which offers means by which a taxpayer with undisclosed offshore accounts may become compliant and it is imperative to consider which route (OVDP or this new program detailed about) as once the taxpayer has made a submission under this program they will be ineligible to participate in the OVDP according to the IRS.
AG TAX LLP Can Help
If you have any other tax-related queries, and/or need assistance with tax planning/filing please contact AG Tax. Our tax professionals are highly-experienced with U.S. and Canadian tax laws and can provide you the right guidance to handle your tax situation.
Aylett Grant Tax LLP is a full service accounting firm with a dedicated team of experts, who are highly-qualified and experienced in handling situations related to U.S., Canada and other international tax laws.
We can assist with:
- Canadian Personal and corporate tax returns
- Cross Border Taxation and Business Planning
- Personal and Corporate Taxation
- Disclosure of Foreign Assets and other information filings
- Retirement planning
- Estate Planning, Inheritance tax advice
To obtain a quote or to arrange for a consultation to discuss your tax related queries, please contact us at:
- 416-238-5920 (Greater Toronto Area, ON)
- 604-538-8735 (Greater Vancouver Area, BC)
- 780-702-2732 (Greater Edmonton Area, AB)
Disclaimer: The information in this publication is accurate as of the time of its publication. AG Tax assumes no responsibility for changes to tax legislation subsequent to the publication of this document. The information provided is for general information purposes only and should not be acted upon without seeking professional advice. If you would like to engage our services, please contact our staff and obtain authorization to send our firm confidential information. A client relationship is not created by the transmission of information. A client relationship is only formed with our firm when a scope and engagement letter signed by the firm and the potential client detailing the terms of engagement is present.
