Tax Relief for Expats Starting September 1st

The IRS just announced a special program to reduce the filing requirement stress of expats who did not know that they had to file. They are launching a special program on September 1st for "low compliance risk" taxpayers that will allow you to file the last 3 years of tax returns and the last 6 years of FBARS, if required, penalty free!

So the 6 year filing statute is in essence being put on hold...so filing the last 3 years and paying a minimal tax due with interest takes you "off the hook" for all prior years. All you have to do is provide a reasonable explanation, pass the review process, and "poof" the IRS is off your back.

"Low compliance risk" taxpayers are those who owe little or no tax.
http://www.expatriatetaxreturns.com/

How would this affect tax non-filing from period earlier than three years ago?

If you don't owe tax you don't have to file.

If you don't owe tax you don't have to file.

Can you clarify the advice you are giving here? Are you stating if one doesn't owe tax, regardless of level of income, they are not required to file a US tax return?

If you don't owe tax you don't have to file.

I believe your requirement to file a US tax return depends on your income level. Are you saying that the IRS is saying that if you didn't file taxes before and you own no tax then you don't have to file those tax returns retrospectively? Sounds a little "chicken and egg" to me.

Yeah, that isn't worded well, and it leaves me squirming for people that could get in trouble reading it.  People in the UK don't need to pay tax if they are under the threshold, but they still need to file--otherwise there would not be tax relief for people who owe "little or no" tax.

I think you only don't have to file if you make under the personal allowances level--but even then there can be benefits sometimes to filing such as allowances that you might get.  If you are an accountant that is supposed to help people with their taxes shouldn't you know if they need to file?

I assumed that post was a direct answer to BostonDiner's question about missed filing that is older than 3 years.

How long has the rule about filing from abroad been in place, anyway? I never heard anything about it back in the 1970's or 80's.

If I earn nothing, do I have to file?

If I earn nothing, do I have to file?

It is sometimes helpful to file a US tax return simply to save the IRS chasing in the future - but of course this is not required.

The new IRS policy is great news but:
1. You can only qualify if the US tax due is below $1,500 each year (so you'd have to run the numbers using the optimum method and hope the IRS will not disagree
and
2. All of these returns will go to a specially trained IRS unit full of cleverer IRS agents. Even if there is no tax I would probably think of getting a dually US/UK qualified adviser to look at every one just to both give peace of mind and to see if there are any other possible tax breaks on either side of the pond.

2. All of these returns will go to a specially trained IRS unit full of cleverer IRS agents.

And it's those agents that will determine your level of compliance risk. What may seem a low risk simple return to us could be viewed otherwise by the IRS, even if you 'owe little or no tax'.

More details under 'Compliance risk determination' on this IRS page:

http://www.irs.gov/businesses/small/international/article/0,,id=256772,00.html

"Additional information regarding the specific factors the IRS will use to assess the level of compliance risk," will be released at a later date.

But if I never earn a single penny, I don't have to worry do I?

But if I never earn a single penny, I don't have to worry do I?

There are other sorts of income like dividends and pensions, so you might not have any earned income, but still have to file taxes. I'd generally file a tax return even if you don't earn anything just to keep up to date with the IRS and also to keep you "in the loop" and aware of you tax situation incase anything changes.

Can you clarify the advice you are giving here? Are you stating if one doesn't owe tax, regardless of level of income, they are not required to file a US tax return?

What I am saying...if you owe no tax for prior years, starting on this September 1 program, you will only need to file for 2009, 2010, and 2011 to be in compliance.

In the past, there was a 6 year statute ...which meant that you had to file for 6 years, if you owed no tax, to be in compliance.

Of course once you are complaint, you must file for all future years, even though you owe no tax.

I believe your requirement to file a US tax return depends on your income level. Are you saying that the IRS is saying that if you didn't file taxes before and you own no tax then you don't have to file those tax returns retrospectively? Sounds a little "chicken and egg" to me.

As a US citizen you are required to file a US tax return, reporting your worldwide income.  There are filing income provisions based on your status of single, married filing joint, head of household, etc ...but basically, if you earn over $5,000, you should be filing.

What the IRS is offering here is filing relief for those citizens who live off shore and owe no tax, usually because of the foreign income exclusion or foreign tax credits.  Instead of filing for the last 6 years, you only need to file for the past 3 years.

Also, many people who have over $10,000 in banks accounts have neglected to file the FBAR form because they did not realize it was required.  There have always been pretty stiff failure to file penalties associated with that form.  Starting September 1, as a part of this program, they are waiving those penalties.

THE FINAL RULES HAVE NOT YET BEEN ANNOUNCED ...