Monday, October 22, 2012

U.S. Non-Resident, Non-Filer, Streamlined Compliance Initiative | Bellevue Tax Lawyer


As I mentioned in my FBAR Updates post from 6/27, on September 1, the IRS announced the instructions for the new non-resident, non-filing US taxpayer compliance initiative.  The instructions can be found, here.  

The initiative is available to non-resident U.S. taxpayers that have lived abroad since 2009, owe less than $1500 in taxes and have not filed taxes since 2009; and taxpayers that failed to properly request deferral using Treaty Form 8891.  Form 8891 is used for Canadian RRSPs and RRIFs.  The treaty relief is also permitted in the OVDP, and OVDI if your case is still open.

Eligibility for this initiative is based on four questions listed in the questionnaire:

(1) Have you lived in the U.S. for any period since January 1, 2009?
(2) Have you filed a U.S. tax return for 2009 or later?
(3) Do you owe more than $1500 in U.S. taxes for each year individually?
(4) If you are submitting returns solely for the purpose of requesting retroactive
deferral of income on Form 8891, are there any adjustments reported on the amended return to income, deductions, credits, or taxes? 

Unless you are requesting Form 8891 relief, you must answer no to all four of the questions.  If you are requesting 8891 relief, you can answer yes to question (2) if you are only filing amended returns to make the 8891 election.  If you do not meet these requirements you are not eligible for the initiative.  The questionnaire can be found, here

Unlike the OVDP, the initiative does not provide protection against criminal prosecution.  Also, once a taxpayer makes a submission under this initiative, the taxpayer is not longer eligible to participate in the OVDP.

The program does not protect the taxpayer against the risk of audit.  The IRS does not go into detail about how it will decide if a return is high risk and possibly subject to an audit.  Based on the information provided, it appears that the more complicated the tax return and the closer the taxpayer is to the $1500 a year threshold, the higher the risk, and more likely to be examined.  Otherwise, it does not provide much detail about how to determine compliance risk.  

As with everything related to the IRS, it is difficult to provide comprehensive information related to taxes on the web.  Please do not rely on this article without consulting your tax professional.  If you are unsure about whether you should enter this program contact a tax professional.