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Relief procedures for certain former United States citizens

Relief procedures for certain former US citizens

Terry Hoban and Noelle Abella discuss the IRS’ new Relief Procedures for Certain Former Citizens, and why now may be the most opportune time to consider expatriating from the US.

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This time last year the United States (US) Internal Revenue Service (IRS) closed the door to one of its long-running voluntary disclosure programs, wiping away one option for delinquent US taxpayers to come back into compliance.

But as the saying goes, ‘when one door closes, another one opens’.

What are the new Relief Procedures?

The IRS announced new Relief Procedures on 6 September 2019 to support former US citizens to come back into compliance with their US tax filing obligations and avoid any potential ‘exit tax’.

The Procedures allow a taxpayer to come back into US tax compliance without actually having to pay any tax owed, provided they meet the following criteria:

  1. Their failure to file tax returns was non-willful.
  2. They did not previously have a filing history as a US citizen or resident.
  3. They had an average annual net income tax liability after credits for the 5 years ending before the year of expatriation below a certain annually-adjusted threshold (US$168,000 for 2019).
  4. They had global net assets of less than US$2,000,000 at the time of expatriation and at the time of filing their return under these procedures.
  5. They did not have an overall tax liability of more than US$25,000 over the five tax years prior to expatriating and in the year of expatriation.
  6. They agree to complete and submit all required Federal tax returns for the six tax years at issue, including all required schedules and information returns such as Form 8938, Statement of Foreign Financial Assets and FinCEN Form 114, the FBAR.

The IRS is also allowing individuals to file tax returns under the Relief Procedures without needing to obtain a social security number – a lengthy and administratively burdensome process for citizens living outside of the US.

To continue reading more about the the new relief procedures, please log on to KPMG Tax Now.

Please register for KPMG Tax Now if you're yet to do so.

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