IRS Amnesty for former citizens to come into compliance with US Tax and filing obligations

IRS has recently announced a new procedure whereby certain individuals who relinquished their U.S. citizenship could come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

As per US Tax laws, U.S. citizens, and Green Card holders, regardless of whether they live in the United States or abroad, are required to report and pay to the Internal Revenue Service (IRS) all applicable taxes on their worldwide income, including on their income from foreign financial assets. 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.

Individuals who relinquished their U.S. citizenship any time after March 18, 2010, are eligible to avail of relief provided by the new procedure announced by the IRS so long as they satisfy the other criteria of the procedures.

According to the IRS, the Relief Procedures for Certain Former Citizens apply only 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.  Moreover, only taxpayers whose past compliance failures were non-willful can take advantage of these new procedures.

Expatriated individuals who are eligible to avail of the Relief Procedures and wish to use them, are required to file delinquent U.S. tax returns, including all required information returns, for the five years preceding besides the one for their year of expatriation. If the taxpayer's tax liability does not exceed a total of $25,000 for the six years in question, the taxpayer is even relieved from paying U.S. taxes, penalties and interest.

Announced in September 2019, the IRS is currently offering these procedures without a specific termination date as of now, but IRS will announce a closing date prior to ending the procedures.