September 15, 2017

Have You Let Your U.S. Tax Filings De-Rail?

If you are a U.S. Citizen living outside the United States who has not been complying with your required U.S. tax reporting, you could be putting yourself at serious risk. […]

If you are a U.S. Citizen living outside the United States who has not been complying with your required U.S. tax reporting, you could be putting yourself at serious risk. This also applies to U.S. citizens who have complied but failed to report foreign financial assets and income on those financial assets. Where the non-compliance is non-willful, you may qualify under the IRS Streamlined Foreign Offshore Procedures…

Streamlined Filing

Allows U.S. taxpayers to make a voluntary disclosure without penalty. Submissions are less onerous than the Offshore Voluntary Disclosure Program (“OVDP”). The OVDP is intended for U.S. taxpayers with exposure to potential criminal and civil liabilities due to their willful failure to report their foreign financial assets and pay all taxes due on those assets.

To get caught up under Streamlined Filing you need to submit the following:

  1. 3 years worth of delinquent tax returns or amended tax returns for the years where the U.S. tax return due date has passed; (i.e. if you wish to submit under the Streamlined in 2016, you need to submit tax returns from 2012 to 2014 and be fully compliant in 2015 by filing by the due date).
  2. 6 years worth of bank information (i.e. 2009-2014 for filings in 2016 plus 2015 that will be timely filed by June 30, 2016).

We know the process can be expensive, but in most cases the cost of compliance will far outweigh the penalties for non-compliance and it’s worth your peace of mind.

Non-Compliance is not Worth it

There is an existing intergovernmental agreement between Canada and the U.S. that is in place which is designed to detect “non-compliant” U.S. citizens. Canadian banks are obligated to report bank account information to the Canadian government which is then reported to the IRS for all U.S. citizens, regardless of where they live.

On January 12, 2015 the IRS released information on the launch of the International Data Exchange Service which is a system that sends information to the IRS on financial accounts, held by U.S. persons.

There is a minimum $10,000 fine per year, per undisclosed foreign account charged for each account and for certain forms that are missing from your U.S. tax return.

After you have filed 5 years of tax returns, you can consider renunciation in order to stop filing US tax returns and paying U.S. taxes. Special rules apply to high net-worth U.S. taxpayers upon renunciation.

In December 2015, IRS officials stated at some point that they will stop accepting ignorance as the reason for delinquent filing and begin assuming any tax delinquency as a willful evasion. There will be a warning before this happens but no timeframe is disclosed as of yet.

Let us help you get compliant with your U.S. Tax filings now, before it’s too late.

The purpose of this information is to provide general information surrounding the Streamlined Program and is current to March, 2016. Details of the program are subject to change into the future and we advise you to not take any action without seeking appropriate professional advice based on your personal situation.