Tax Relief Procedures for Former Citizens and Expatriates

On September 6, 2019, the IRS announced procedures for certain taxpayers who have relinquished or intend to relinquish their United States citizenship and wish to come into compliance with U.S. tax return and reporting requirements.

The procedures are intended to ameliorate the tax burden faced by taxpayers who may have lived outside the United States most of their lives and may have not been aware that they had U.S. tax obligations. Taxpayers who qualify and successfully go through the tax relief procedures will avoid being taxed as covered expatriates under Section 877A.

Eligibility and requirements for the expat tax relief procedures

These procedures may only be used by taxpayers whose failure to file required tax returns (e.g. income tax returns, gift tax returns) and information returns (e.g., Form 8938, FBAR) and pay taxes and penalties for the years at issue was due to non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.

You must meet the following other eligibility requirements:

  1. You have relinquished your U.S. citizenship after March 18, 2010.

  2. You have no filing history as a U.S. citizen or resident;

  3. You did not exceed the threshold in IRC 877(a)(2)(A), related to average annual net income tax for the period of 5 tax years ending before your date of expatriation;

  4. Your net worth is less than $2,000,000 at the time of expatriation and at the time of making your submission under these procedures;

  5. You have an aggregate total tax liability of $25,000 or less for the five tax years preceding expatriation and in the year of expatriation (after application of all applicable deductions, exclusions, exemptions and credits, including foreign tax credits, but excluding the application of IRC 877A and excluding any penalties and interest).

  6. You agree to complete and submit with your submission all required Federal tax returns for the six tax years at issue, including all required schedules and information returns.

These procedures are only available to individuals. Estates, trusts, corporations, partnerships and other entities may not use these procedures.

After reviewing your submission to confirm that you meet the eligibility criteria, the IRS will send you a letter notifying you that your submission was received and complete.

If you are not eligible to make a submission under these procedures and still make a submission, the IRS will process your returns using normal processing procedures. You will be liable for all taxes, penalties, and interest associated with the submission.

Benefits of the expat tax relief procedures

If eligible individuals submit and meet the requirements of these procedures, they will not be “covered expatriates” under IRC 877A, nor will they be liable for any unpaid taxes and penalties for these years or any previous years.

If you are eligible to use these procedures, the IRS will not assert any penalties.

How long are these procedures available?

The IRS is offering these procedures without a specific termination date. The IRS will make an announcement prior to terminating these procedures.

No Social Security number required

If you do not have an SSN you may still make a submission under these procedures.  In this situation, and for purposes of these procedures, leave the boxes blank where an SSN is requested.  It is not necessary to obtain an SSN merely for the purpose of using these procedures. If you mistakenly applied for and received an ITIN in the past, you would include your ITIN on your submission.