The Tax Times: Tax Relief Available For Certain Americans Who Want To Expatriate!

According to a recent government statistics, there are roughly 9 million US citizen living outside the US, many of whom are citizens by birth but have little or no family or economic ties to this country.

Under US immigration laws, those who had been born in the US to farm parents were born outside the US to US parents are US citizens, but my not be aware of their status or its importance. These "accidental" Americans, by law are required to report the worldwide income and pay taxes to the IRS. They also remain subject to an array of disclosure requirements for their 9 US financial and security accounts and other assets under the Foreign Account Tax Compliant Act (FATCA).

Are These Tax And Compliance Burdens Worth Maintaining A Passport For A Country A Person Has Little Connection To?
For many, the answer is no, and when they learn of their obligations, they seek to "turn in" their U.S passports, or at least explore the option of renouncing their U.S. citizenship. What many find out is that it is not so simple for the accidental citizen, particularly for those who have accumulated some level of wealth over their lifetime.

Under the Relief Procedures for Certain Former Citizens , the IRS is providing an alternative means for satisfying the certification test for citizens who expatriate, or have expatriated, after March 18, 2010. The IRS is providing an alternative means for satisfying the tax compliance certification process for citizens who expatriate after March 18, 2010, under the this Relief Procedure.

These procedures are only available to U.S. citizens with a net worth of less than $2 million (at the time of expatriation and at the time of making their submission under these procedures), and an aggregate tax liability of $25,000 or less for the taxable year of expatriation and the five prior years.

If these individuals submit the information set forth below and meet the requirements of these procedures, they will not be “covered expatriates” under IRC 877A, nor will they be liable for any unpaid taxes and penalties for these years or any previous years.

These procedures may only be used by taxpayers whose failure to file required tax returns (including income tax returns, applicable gift tax returns, information returns (including Form 8938, Statement of Foreign Financial Assets), and Report of Foreign Bank and Financial Accounts (FinCEN Form 114, formerly Form TD F 90-22.1)) and pay taxes and penalties for the years at issue was due to non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

As part of the process, an eligible individual must submit all required federal tax returns for the six years at issue, including all required schedules and information returns. This does not include the Report of Foreign Bank and Financial Accounts (FinCEN Form 114, formerly Form TD F 90-22.1, the "FBAR"), although the IRS recommends that those taking advantage of the relief procedures file FBARs. If they do so, the IRS will not assert FBAR penalties for late filing.

If an individual submits the necessary tax returns and forms and meets the requirements of the relief procedures, they will not be a "covered expatriate" under IRC Sec. 877A, nor will they be liable for any unpaid taxes and penalties for the six years at issue or any previous years.

The relief procedures may only be used by taxpayers whose failure to file required tax returns, including income tax returns, applicable gift tax returns, information returns (including Form 8938, Statement of Foreign Financial Assets), including the FBAR and pay taxes and penalties for the years at issue was due to non-willful conduct.

Non-Willful Conduct Is Conduct That Is Due To Negligence, Inadvertence, Or Mistake Or Conduct That Is The Result

of A Good Faith Misunderstanding of

The Requirements Of The Law.

There is currently no termination date for these procedures. The relief procedures provide an excellent opportunity for those who might otherwise be subject to significant tax and penalties because of their expatriation.

"Should I Stay or Should I Go?"