Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers (Expatriates)

On June 26, 2012, the IRS announced new streamlined filing compliance procedures for non-resident U.S. taxpayers to go into effect on September 1, 2012. These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1, but have recently become aware of their filing obligations and now seek to come into compliance with the law. These new procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns.

Description of the New Streamlined Procedure

This streamlined procedure is designed for taxpayers that present a low compliance risk. All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission. For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of theOffshore Voluntary Disclosure Program.

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years. Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns. For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13. (December 2011).

Read the rest of the details of the program HERE

Download IRS Submission Questionnaire Used to Enter Program HERE

For Details of the 2012 Voluntary Offshore Disclosure Initiative click HERE.  This program is for those who wish to avoid criminal prosecution and have more complex returns and owe more than 1,500 for any of the past unfiled tax years.

Why You Need Expert Tax CPAs and Attorneys

The following items are some of the reasons you need expert tax help with your return and tax  planning:

• The US tax code and explanatory rulings and regulations has grown from   400  pages in 1913           to  73,608  pages today.
• The IRS by its own admission only answers 75% of the phone calls it receives from taxpayers.
• The IRS has over 100,000 employees and therefore has become a very complex and sometimes disorganized bureaucracy. 
• 4,428 changes have been made to the US Tax Code during the past 10 years. That averages over 1 change per day.
• Businesses and individuals spend 6.1 Billion hours each year complying with US tax filing requirements.
• Sixty percent of all individual taxpayers hire someone to do their tax returns.
• The IRS estimates each taxpayer in 2001 paid an average of $2,200 each year to make up for the taxes owed by those who did not file, or cheated on the tax return they did file.
• The US Expatriate and International tax forms, laws and regulation are so complex that most CPAs and Enrolled Agents do not know enough to help taxpayers with Expatriate or International Tax Deeds.

PRIVATE LETTER RULING ON FIDEICOMISOS - THIS ONE DOES NOT HAVE TO FILE FORM 3520 ET. AL.

For the first time ever the IRS has made pronouncement concerning whether a Mexican Fideicomiso beneficiary has to file US tax forms 3520 and 3520A.

The bad news is that it made this pronouncement by way of a Private Letter Ruling which is only binding on the IRS with respect to the taxpayer who applied for the ruling. The IRS  IS NOT bound by the holdings in the ruling with respect to other taxpayers. Other taxpayers also by law can not cite a Private Letter Ruling as authority for their position.

The Private Letter Ruling held that in the particular factual situation of the Taxpayer who applied for the ruling that the US Taxpayer was not required to file the Forms 3520 for that Taxpayer's Fideicomiso.

Whether referring to this private letter ruling will cause the IRS to eliminate penalties for not filing Forms 3520 for a Fideicomiso cannot be determined at this time.  For any filer to be completely certain they did not have to file these forms, the IRS would need to make a written public announcement that such filing was not required.  For the last 7-9 years the IRS has been requested to make such a public written holding, and has not done so to date.   SEE THE REDACTED RULING HERE. THE IRS HAS NOT YET PUBLISHED IT.

IRS Requires Reporting of Foreign Gifts Received from Abroad

If you as a US Citizen, Green Card Holder, or even a resident of the US living here on a visa received  gifts of more than $100,000 (cumulative amounts per calendar year) in gifts or inheritances from a nonresident  foreign individual or gifts of $14,375 from a foreign corporation or partnership (cumulative amounts per calendar year), you must report these amounts to the IRS by filing Form 3520.  Failure to file this form can result in penalties up to  35% of the amount of the gift or inheritance.

The IRS does track large sums transferred from abroad to US residents and will often audit these individuals fail to report these transfers on their tax returns to try to determine if they are not paying US taxes on taxable income from abroad. It is best you have complete documentation for all amounts arriving from abroad which are not taxable  in the event you are audited If the transfer is a  gift or inheritance and fail to file Form 3520, the IRS may impose the penalty.

We have helped hundreds of taxpayers file Form 3520 and we can help you avoid these possible huge penalties and the cost of defending your position in the event you are audited on transfers of funds from abroad.

If you Owe the IRS Back Taxes, you may be detained at the Border when Entering the USA

It is believed that the IRS has established procedures to facilitate tax collection from taxpayers who live outside the United States. If such a  taxpayer has an unpaid tax liability and is subject to a resulting Notice of Federal Tax Lien, the IRS is probably submitting  identifying taxpayer information to the Treasury Enforcement Communications System (TECS), a database maintained by the Department of Homeland Security (DHS). The database allows the DHS to identify taxpayers with unpaid tax assessments who are traveling to the United States for business, employment, or personal reasons . Therefore, it appears  taxpayers traveling to the United States with unpaid tax assessments increasingly are being detained at the border by the DHS.