On June 26, 2012, the IRS announced new Streamlined Filing Compliance Procedures for non-resident U.S. taxpayers to go into effect on September 1, 2012. These new procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns.
The IRS website now has specific instructions for this Streamlined Compliance Procedure.
Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns.
In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by relevant treaty is available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.
This procedure is available for non-resident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax return during the same period. These taxpayers must present a low level of compliance risk as described below.
Amended returns submitted through this program will be treated as high risk returns and subject to examination, except for those filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty.
It should be noted that this relief is also available under the Offshore Voluntary Disclosure Program.
All tax returns submitted under this procedure must have a valid Taxpayer Identification Number (TIN). For U.S. citizens, a TIN is a Social Security Number (SSN). For individuals that are not eligible for an SSN, an Individual Taxpayer Identification Number (ITIN) is a valid TIN. Tax returns filed without a valid SSN or ITIN will not be processed. For those who are ineligible for an SSN, but who do not have an ITIN, a submission may be made through this program if accompanied by a complete ITIN application.
Compliance Risk Determination
The IRS will determine the level of compliance risk presented by the submission based on information provided on the returns filed and based on additional information provided in response to a Questionnaire required as part of the submission.
Low risk will be predicated on simple returns with little or no U.S. tax due. Absent any high risk factors, if the submitted returns and application show less than $1,500 in tax due in each of the years, they will be treated as low risk and processed in a streamlined manner.
The risk level may rise if any of the following are present:
· If any of the returns submitted through this program claim a refund;
· If there is material economic activity in the United States;
· If the taxpayer has not declared all of his/her income in his/her country of residence;
· If the taxpayer is under audit or investigation by the IRS;
· If FBAR penalties have been previously assessed against the taxpayer or if the taxpayer has previously received an FBAR warning letter;
· If the taxpayer has a financial interest or authority over a financial account(s) located outside his/her country of residence;
· If the taxpayer has a financial interest in an entity or entities located outside his/her country of residence;
· If there is U.S. source income; or
· If there are indications of sophisticated tax planning or avoidance.
The site provides Instructions for Using This Procedure.
Taxpayers who are concerned about the risk of criminal prosecution should be advised that this new procedure does not provide protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer's particular circumstances warrant such prosecution.
Taxpayers concerned about criminal prosecution because of their particular circumstances should be aware of and consult their legal advisers about the Offshore Voluntary Disclosure Program (OVDP), announced on January 9, 2012, which offers another means by which taxpayers with undisclosed offshore accounts may become compliant.
It should be noted, however, that once a taxpayer makes a submission under the new procedure described in this document, OVDP is no longer available.
It should also be noted that taxpayers who are ineligible to use OVDP are also ineligible to participate in this procedure.
If you would like to avail yourself of this new Amnesty, contact the Tax Lawyers at Marini & Associates, P.A. for a FREE Tax Consultation at www.TaxAid.us or www.TaxLaw.ms or Toll Free at 888-8TaxAid (888 882-9243).