Tax Reprieve to Dual Citizenship Holders

Those who have been suffering sleepless nights over the crackdown by the IRS on worldwide reporting and FBARs (Foreign Bank and Financial Accounts) can now sleep better, as the IRS has released a "fact sheet" that contains favorable guidelines on how to file U.S. tax returns, and FBARs for offshore accounts for those U.S. citizens living abroad who failed to file their returns.

The exemptions by the IRS are, however, not blanket relief and will depend on one's reasons for failure to file. The basic requirements for U.S. citizens residing abroad are listed below:

1. If one makes an amount greater than the minimum exemption and standard deduction, then one must file an annual U.S. income tax return and declare one's worldwide income, whether it is taxed elsewhere or not.

2. If one failed to file U.S. taxes for a period exceeding six years, the years beyond the six can be overlooked meaning that one only needs to file six back years. However, if one does not owe tax on those returns, then no penalty will be applied.

3. For accounts outside the U.S. that contain amounts of over $10,000, one needs to file FBARs annually.

The IRS has been applying the standards of voluntary disclosure of 2009 and 2011, which could signify loss of one's savings to FBARs penalties. However, the IRS is making efforts to adopt a more fact specific and reliable approach to determine relief status.

For citizens residing abroad, the IRS says that one won't face penalties, as long as one provides good reasons or shows reasonable cause. The IRS examines a taxpayer's reasons for tax filing failure, compliance history, time taken between filing failure and eventual compliance, and circumstances that might be considered to be beyond the taxpayer's control.

One also requires a reasonable cause, which might include one's educational background, whether or not one was previously subject to taxation, any previous penalties, and whether one could not be reasonably expected to be aware of recent changes in tax forms or legislations.

Depending on one's facts and circumstances, one might avoid penalties by establishing reasonable cause for failure to file the tax returns, such as proving that one was unaware of their obligation to file returns or pay taxes.

The fact sheet's guidelines on FBARs state that one should file delinquent FBARs and provide a written statement explaining why they failed to file on time. One is only required to file FBARs that are due within the last six years because the limitations statute is six years from the FBAR's due date. IRS penalties can be avoided by offering a reasonable cause for filing failure.

Rob L Daniel and partners of Limon Whitaker & Morgan, for years have helped businesses and individuals Nationwide, with their delinquent IRS & State tax problems. The firm is based in Los Angeles, California USA.
http://www.limonwhitaker.com / Tel:888.321.6188

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