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Streamlined filing compliance procedures for non-resident U.S. taxpayers

On June 26, 2012, the IRS announced new streamlined filing compliance procedures for non-resident U.S. taxpayers went into effect on Sept. 1, 2012. These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), but have recently become aware of their filing obligations and now seek to come into compliance with the law. 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 purpose of the program is to allow U.S. citizens living outside the United States to return and submit their annual reports required by law, without punishment , in consideration of the fact that apparently they were not aware of the duty to file tax returns because they do not live in the U.S.

 

 

This streamlined procedure is designed for taxpayers that present a low compliance risk. All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up

 

actions. Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.

The IRS reserves the right to decide whether a citizen is - Low compliance risk taxpayer based on a questionnaire submitted by the citizen in the framework and on the basis of tax reports submitted. Therefore a problem is created for the citizen who wants to participate in the program - the taxpayer can not know clearly whether he is entitled to take part in the program.

However, there are preliminary criteria to assess whether the citizen is considered as Low compliance risk taxpayer and entitled to participate in the program, but still the IRS reserves the right to the last word. 

 

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