In a move aimed at providing delinquent tax filers with a means of remedying their records, the IRS this week announced that they would be launching a new program that would allow U.S. expatriates who owe back taxes to come clean without facing the significant penalties that are usually levied on late payers.
The latest plans from the IRS relate to the Reports of Foreign Bank and Financial Accounts, which expatriates are required to file on an annual basis. These reports provide a means through which U.S. citizens living abroad declare their income to the IRS, who subsequently determine the tax that is owed. In recent years a growing number of overseas American citizens have failed to file their returns and this has negatively impacted the IRS’ revenue.
While the amnesty may come as good news to some delinquent tax payers, the reprieve will be relatively limited. The proposed plans, which are set to be start in September 2012, will be limited to expatriates who owe less than $1,500 in each of the covered years. Those that owe amounts in excess of this will face the usual penalties associated with late filing and payment.
“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,” IRS Commissioner Doug Shulman said in a statement.
Experts estimate that the IRS currently faces a tax gap of around $450 billion. The latest decision is aimed at allowing expatriates to catch up on the tax they owe and subsequently closing this gap.
Expatriates who do take advantage of the reprieve will be required to submit a dated statement, signed under penalties of perjury, that discloses the reasons why they failed to file.
Please note that this article is for information purposes only. If you are considering committing to any of the IRS’s voluntary disclose programs, you should seek the help and advice of a professional and legitimate tax advisory service. If you have any questions about your tax status, check out our expatriate directory, which contains listings for expatriate tax advisory services.
