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The IRS has implemented streamlined filing compliance procedures for "low-risk" nonresident U.S. taxpayers who have not filed income tax returns and statements of financial accounts.

Procedures Streamlined for Nonresident Filing of FBARs and Tax Returns

  • 9/12/2012

Procedures Streamlined for Nonresident Filing of FBARs and Tax Returns

The IRS met its promised September 1, 2012, deadline and has implemented streamlined filing compliance procedures for “low-risk” nonresident U.S. taxpayers who have not filed income tax returns and statements of financial accounts. Taxpayers who want a streamlined review must fill out a new questionnaire and follow new instructions provided by the IRS.

CCH Take Away: The IRS announced the program on June 26, 2012, with a September 1, 2012, effective date. The streamlined program provides an expedited review, with no penalties, for low-risk taxpayers. However, some have questioned whether the program is so narrow that taxpayers will not be able to qualify as low-risk.

New program

U.S. taxpayers who have lived abroad since 2009, and who have not filed U.S. income tax returns during the same period, may participate if they are low-risk. Taxpayers must submit three years of federal income tax returns, and six years of Report of Foreign Bank and Financial Accounts (FBARs). All returns must have a valid taxpayer identification number (TIN).

The IRS will provide less intensive, more expedited reviews of submissions from low-risk taxpayers, and will not assert penalties. Returns with less than $1,500 in taxes due each year will be considered low-risk, unless there are high-risk factors, such as:

  • A return claims a refund
  • The taxpayer is under IRS audit or investigation
  • The taxpayer has received an FBAR warning letter
  • The taxpayer has a financial interest in an account or entity outside his or her country of residence
  • There is U.S. source income or material economic activity
  • The taxpayer engaged in sophisticated tax planning or avoidance

Other considerations

The IRS cautioned that the streamlined program does not provide protection from criminal prosecution, and recommended that taxpayers concerned with prosecution consider the Offshore Voluntary Disclosure Initiative, which the agency reopened in early 2012.

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