Volume No. 12-28

“These procedures became effective on September 1, 2012.”

In Tax Tip 12-18 we explained that the IRS had introduced new “streamlined” catch-up filing procedures for U.S. citizens who were resident outside  of the United States and had not filed U.S. tax returns.  These procedures became effective on September 1, 2012.

These procedures are only available to “low-risk” non-resident U.S. taxpayers (see Tax Tip 12-18) who have resided outside of the United States since January 1, 2009 or earlier and who have not filed a U.S. tax return during this period. Taxpayers who are not eligible under this program may still file under the 2012 Offshore Voluntary Disclosure Initiative (see Tax Tip 12-02) or consider filing under the “reasonable cause” approach.

In general, amended returns will not be accepted under this procedure. However, taxpayers who have filed but did not make the election to defer income earned in their RRSP or RRIF (Form 8891, “U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans” ) may file under this procedure to make a late election. 

Taxpayers who are concerned about criminal prosecution should not file under this procedure as it does not provide protection from criminal prosecution if the IRS and the Department of Justice determine the taxpayer’s particular facts warrant such prosecution.  Once a taxpayer makes a submission under the new procedure, the ability to partake in the Offshore Voluntary Disclosure Initiative is no longer available.

Under the streamlined  procedure, eligible taxpayers must:  

1. Submit complete and accurate returns for the last three years.
    
2. Write “Streamlined” on the top of the first page of each tax return.
    
3. Submit payment of all tax due as reflected on the returns and statutory interest due and owing.
    
4. Submit complete and accurate delinquent FBARs (Form TD F 90-22.1, “Report of Foreign Bank and Financial Accounts“) for the last six years for which an FBAR is due.
    
5. Submit a complete, accurate and signed IRS questionnaire.
    
6. If an Individual Taxpayer Identification Number (ITIN) is required , submit all necessary documentation  with the submission..  Note as of June 22, 2012  the IRS will only accept original documents or documents certified by the issuing office.
    
7. Taxpayers who wish to make a late election to defer income earned in their Canadian retirement plan must attach Form 8891 for each tax year, sign a statement requesting an extension of time to make the election and sign a statement, under penalties of perjury,
   • outlining the events that led to their failure to make the election,
      
   • the events that lead to their discover of the failure to file, and
      
   • if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities.
      
8. Send all required documents to: 

   Internal Revenue Service
   3651 South I-H 35
   Stop 6063 AUSC
   Attn: Streamlined
   Austin, TX 78741 

Filing under this procedure does not guarantee that no penalties will be assessed if the IRS determines that the filer was not low risk. If you plan on using this program we suggest you contact your TSG representative.

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TAX TIP OF THE WEEK is provided as a free service to clients and friends of the Tax Specialist Group member firms. The Tax Specialist Group is a national affiliation of firms who specialize in providing tax consulting services to other professionals, businesses and high net worth individuals on Canadian and international tax matters and tax disputes.

The material provided in Tax Tip of the Week is believed to be accurate and reliable as of the date it is written. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Neither the Tax Specialist Group nor any member firm can accept any liability for the tax consequences that may result from acting based on the contents hereof.

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TAX TIP is provided as a free service to clients and friends of Cadesky Tax.

The material provided in Tax Tip is believed to be accurate and reliable as of the date of posting. Tax laws are complex and are subject to frequent change. Professional advice should always be sought before implementing any tax planning arrangements. Cadesky Tax cannot accept any liability for the tax consequences that may result from acting based on the contents hereof.