The Internal Revenue Service (IRS) has announced new procedures that will enable certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

The Relief Procedures for Certain Former Citizens apply to:

  • Individuals who have not filed U.S. tax returns as U.S. citizens or residents
  • Owe a limited amount of back taxes to the United States and
  • Have net assets of less than $2 million.

These procedures are only available to individuals. Estates, trusts, corporations, partnerships and other entities may not use these procedures. Only taxpayers whose past compliance failures were non-willful can take advantage of these new procedures. Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation.

Provided that the taxpayer’s tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. The purpose of these procedures is to provide relief for certain former citizens. Individuals who qualify for these procedures will not be assessed penalties and interest.

The IRS is offering these procedures without a specific termination date. The IRS will announce a closing date prior to ending the procedures. Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible if they satisfy the other criteria of the procedures.

Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irrevocable decisions. Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime.

If you are a U.S. expatriate who needs assistance filing U.S. taxes from abroad or you have questions about the new IRS procedures, please contact our foreign tax filing experts.