IRS creates new procedures to facilitate American ex-patriots with tax obligations – Optima Tax Relief reviews how this change may aid in bringing ex-patriots back into favorable standing with the IRS.
Earlier this month, the IRS announced new procedures that will create a process for American ex-patriots to become complaint with their U.S. tax obligations and includes potential relief for those with back taxes. Optima Tax Relief’s team of tax experts review the new procedures and break down what these new updates mean for ex-patriots who have previously relinquished their U.S. citizenship.
The new policy, officially known as the Relief Procedures for Certain Former Citizens, may seem like a beacon of opportunity for ex-patriots desiring to become whole on their tax obligations to the U.S. However, these relief procedures do have limits on who can benefit – such as limited amounts of back taxes owed, and less than $2 million in total net assets. For those that willfully fell out of compliance with their tax responsibilities, this relief is not eligible.
This program was designed to provide a solution for those who may have lived abroad for most of their lives and are simply unaware of their ongoing tax obligations to the U.S. This includes U.S. citizens who may have been born in the United States to foreign parents or born outside the U.S. to American citizen parents. These people may be unaware of their status as U.S. citizens and the tax responsibilities delegated to them as a result. According to the IRS, “U.S. citizens, regardless of whether they live in the United States or abroad, are required to report and pay to the Internal Revenue Service (IRS) all applicable taxes on their worldwide income, including on their income from foreign financial assets.”
In order to begin the process, ex-patriots must submit their previous 5 years of outstanding returns, schedule and information, from the date of their expatriation. If the total tax liability does not exceed the $25,000 cap for the six-year period set by the IRS, the taxpayer is able to qualify for the relief.