IRS Amnesty Programs For Expats

The United States government misses out on billions of dollars in tax revenue year due to avoidance of reporting foreign assets and income. The IRS amnesty programs are put in place to motivate taxpayers to be compliant with the rules when it comes to reporting foreign assets and income. The punishment of not reporting your assets and income can be drastic and include large penalties and passport revocation. To avoid these penalties it is advised to get in right standing with the IRS with the various amnesty programs that are available. Taking advantage of these programs is now more opportune than ever since the IRS has made steps towards improving compliance recently.

Be Proactive

Disclosing your foreign assets to the IRS proactively is in your best interest. Starting penalties for not disclosing your assets could amount $10,000. Depending on how long your delinquency has been and the amount of taxable income, the penalties could be even higher. If the IRS determines that it is a willful failure to file an FBAR form, then the cost can be much higher. It could potentially amount to somewhere greater than $100,000 or 50% of the foreign account balance.

To take advantage of IRS amnesty programs you must initiate the request first. If the IRS comes to you first with your failure to file then it is much more likely for you to be penalized and audited. It is important to be aware that the government is more interested in rightful disclosure. Rest easy knowing that the government is not actively trying to catch you red handed but rather encouraging you disclose your assets to be in compliance with their rules.

Delinquent Submission

One of the first amnesty options you can seek to do is your easiest and most straightforward option. If you file a late FBAR form and provide a well enough reason for the delay and have zero tax liability then the IRS will waive any penalties associated with late filing. This option is for those who are absolutely sure that you are not outstanding on any tax liabilities. If so, then this amnesty will be quick and easy for you.

The Streamlined Filing Compliance Procedures

For taxpayers that have fallen being over a year on returns and disclosures, the Streamlined Filing Procedures is an amnesty program that could help them the most. With this program you can file up to three years of back tax returns and six years of FBAR forms. Expats need to pay their back taxes owed plus interest, but they are spared a 5% that US citizens living within the US need to pay.

For this amnesty program, you will need to demonstrate accurately that you did not willfully evade responsibility towards disclosure and filing. This kind of reason can be very subjective so it is advised to consult and work with a licensed professional for your situation.

Relief Procedures for Certain Former Citizens

This is a new amnesty program is made for expats who renounced their citizenship in order to be tax compliant without being considered a covered expatriate. This procedure will waive your expatriation tax which can be very expensive to where it deters expatriates from renouncing their citizenship. 

This program applies to the following expats:

  • Expats who expatriated after March 18, 2010
  • Those who have a net worth of less than $2 million dollars both at the time of expatriation and at the time of making their submission.
  • Have an aggregate tax liability of $25,000 or less for the year they expatriated and five years prior
  • No prior tax-filing history and non-willful about failing to meet the existing requirements

Updated Voluntary Disclosure Program

In place of the Offshore Voluntary Disclosure Program, the Updated Voluntary Disclosure program was put in its place. The former amnesty program was terminated due to the IRS determining that it was available long enough to be utilized by those who needed it. The new program was higher civil penalties but those who are choosing to do it can go through an appeals process. 

Get Help Today

If you are late on your taxes, don’t wait to talk to licensed professional. Here at Americas Tax Firm, we are dedicated on getting you back on track and being compliant on your US expat tax responsibilities. Get help today!