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IRS Efforts to Assist U.S. Citizens Overseas with Taxes

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The IRS has launched a plan to assist U.S. citizens living overseas, including those who possess a dual citizenship, to catch up with their tax filing obligations and to provide assistance for those who have foreign retirement plans.

The assistance helps those who owe little or no back taxes. The new procedure went into effect on September 1, 2012.

This new procedure was put in place because the IRS was aware that some taxpayers living abroad failed to file their U.S. federal income tax returns on time. They also noticed that the obligatory Reports of Foreign Bank and Financial Accounts (FBARs) were not filed in a timely manner. Many of the individuals impacted were just made aware of their filing requirements and want to comply with the law.

The provisions of the new procedure allow for taxpayers who are low compliance risks to become current with their tax requirements without penalties. Generally, these people will have simple tax returns and owe $1,500 or less in taxes for any of the years reported.

These new procedures also will assist specific issues related to foreign retirement plans. Sometimes tax treaties allow for income deferral under the U.S. tax law, but only if an election is made in the proper time. The procedure will take into consideration resolving problems for those with a low compliance risk even when the election didn’t occur in a timely manner.

Taxpayers wishing to take part in the new procedures are required to file all delinquent tax returns along with the associated appropriated related information for the past three years. FBARs will need to be filed for the last six years.

Those taxpayers who are delinquent, but also are a higher compliance risk, will be required to submit to a more thorough review and potentially are subject to an audit, which might cover more than three tax years.

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