The US Internal Revenue Service (IRS) is inviting taxpayers living outside the States in from the cold by offering to write-off back taxes, fines and penalties.
The IRS will only wipe the slate clean for taxpayers owing less than $1,500 in any single tax year.
In a surprise announcement, the IRS explained US taxpayers living overseas have often failed to realise they should have filed federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs).
The new initiative is aimed at helping taxpayers who want to comply with US laws but only recently became aware of their obligations.
“We are announcing a series of common-sense steps to help US citizens abroad get current with their tax obligations and resolve pension issues,” said IRS Commissioner Doug Shulman.
“The IRS will provide a new option to help current non-residents including, but not limited to, dual citizens, who have not been filing tax returns, and provide them a chance to catch up with their tax filing obligations if they owe little or no back taxes.”
The amnesty starts from September 1, 2012.
Only taxpayers who are considered low compliance risks can take part in the amnesty – more complicated cases will face a more thorough investigation.
The IRS is also introducing new procedures to resolve tax problems with some foreign retirement plans, like Canadian Registered Retirement Savings Plans.
Dealing with foreign retirement plans has sometimes involved following complicated rules and making elections within deadlines.
The new rules streamline the process and make elections less complicated, says the IRS.
The IRS suggests taxpayers who wish to declare foreign earnings but fall outside these schemes should consider the Offshore Voluntary Disclosure Programme to minimise fines and penalties for failing to make tax returns.
