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  • Writer's pictureLewis Grunfeld, CPA

The IRS Amnesty Program: What U.S. Expats Need to Know

Updated: Nov 3

U.S. expats often face tough challenges with tax rules. Making mistakes, even by accident, can cause big problems. That's where the IRS amnesty program comes in. It's a way to fix tax errors without harsh penalties.

What is the IRS Amnesty Program?

The IRS Amnesty Program was established by the Internal Revenue Service (IRS) to provide U.S. expatriates with a simplified means of catching up on their tax filing obligations. Recognizing that many non-resident U.S. citizens may have failed to file U.S. federal tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), not out of willful avoidance but due to misunderstanding their obligations, the IRS introduced this program to encourage voluntary reporting. Under these procedures, expatriates declaring all their foreign income can rectify their tax reporting status without facing failure-to-file and failure-to-pay penalties.

Who Qualifies for the IRS Amnesty Program?

  • Non-Willful Violators: The program is primarily for taxpayers whose failure to report foreign financial assets and income was non-willful, meaning it resulted from genuine misunderstanding or oversight, rather than intentional evasion.

  • Living Outside the US: Individuals must have been physically outside the U.S. for at least 330 full days in any one or more of the most recent three years for which the U.S. tax return due date as passed.

  • Not Under Audit or Investigation: Taxpayers currently undergoing civil examination or criminal investigation by the IRS are excluded from participating in the streamlined procedures. This applies even if the examination doesn't pertain to undisclosed foreign financial assets.

Other IRS Amnesty Programs

FBAR Amnesty Program

The FBAR Amnesty Program allows taxpayers to report undisclosed foreign financial accounts, avoiding harsh penalties. This opportunity requires individuals to submit their last 6 delinquent FBARs, detailing account values and affirming their non-willful non-compliance.

Streamlined Domestic Offshore Procedures

The streamline domestic offshore procedures were designed for taxpayers residing in the United States who have not willfully evaded tax obligations but failed to disclose international assets or foreign income. The program requires taxpayers to amend three years of tax returns to include omitted foreign income and to report six years of FBARs. While participants can avoid the steeper penalties associated with willful non-compliance, they are subject to a 5% penalty on the highest aggregate balance of their undisclosed foreign financial assets during the reporting period.

Relief Procedures for Certain Former Citizens

The relief procedures for certain former citizens provide a pathway for individuals who have renounced, or intend to renounce, their U.S. citizenship to rectify their tax reporting status. Specifically targeting former citizens with a net worth under $2 million and minimal tax liability, this program allows eligible individuals to avoid the stringent tax implications typically associated with expatriation. By submitting specific information and meeting set criteria, participants can escape the "covered expatriate" designation and its substantial tax consequences, ensuring a clean break from U.S. tax obligation's.

IRS Amnesty Programs: A Comparative Table

Program Name

Eligibility Criteria

Key Benefits

Required Compliance Measures

Consequences of Non-Compliance

IRS Amnesty Program - Offshore

Non-resident U.S. taxpayers abroad; Non-willful non-compliance

No penalties, simplified process

3 years of tax returns; 6 years of FBARs

Higher penalties, criminal prosecution

Streamlined Domestic Offshore

Resident U.S. taxpayers, non-willful non-compliance

Reduced penalties, simplified process

3 amended returns, 6 FBARs, tax/interest payment

Higher penalties, criminal prosecution

Delinquent FBAR Submission

Non-willful FBAR omission; No underreported tax

No penalties if tax obligations met

Submit missing FBARs; Explain delay

High financial penalties; Risk of prosecution

Relief for Certain Former Citizens

Renounced U.S. citizens; Past tax compliance

No further tax obligations, avoid covered status

Form 8854; 5 years of tax compliance

Tax penalties; Covered expatriate status

Take the Next Step with Confidence

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