"Accidental Americans" Get Relief! New Announcement from the IRS!!

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Stop the presses, hold the phones, drop everything you are doing! The Internal Revenue Service announced "Relief Procedures for Certain Former Citizens" on September 6th, 2019. If you are an "Accidental American" and planning on renouncing your U.S. Citizenship, you should be reading this. 

Let's dig back a bit and refresh our memories: The United States Constitution provides through the 14th Amendment that "all persons born or naturalized in the United States" are citizens of the USA. A person born abroad to a U.S. citizen parent or parents acquires U.S. citizenship at birth if the parent or parents meet conditions as specified in § 301 and following sections of the U.S. Immigration and Nationality Act. 

Those who have acquired U.S. citizenship in such a manner may not be aware of the obligations and consequences of this status. As you my dear readers already know from my blog, that by law, U.S. citizens regardless of where they live have to report and possibly pay tax on their world-wide income to the Internal Revenue Service. 

With the passage of the FATCA {Foreign Account Tax Compliance Act} in 2010, now foreign financial institutions are required to know if any of their customers are U.S citizens and if that is true, the customer's information is to be reported to the United States. The customer also needs to provide their Social Security Number to the foreign bank where they have their accounts. 

A U.S. Citizen may relinquish his or her citizenship by paying a fee and taking an oath of renunciation before a US diplomatic or consular officer. They also need to certify that they have fulfilled their federal tax obligations for the year of expatriation and five tax years prior to this event. The relinquishment is detailed under IRC 877A. Those who are deemed to be "Covered Expatriates" may continue to have US tax obligations even after they renounce their citizenship. 

What Are the Relief Procedures: The Internal Revenue Service is providing relief to citizens who meet certain criteria by providing an alternative means to satisfy tax compliance certification process. If the citizens qualify, then they will not be "Covered Expatriates" under IRC 877A and they will not be liable to unpaid taxes and penalties for these years and any previous years.

Who Are These Procedures Available To?: These relief procedures come with the following caveats, which the IRS plans on implementing strictly-
  1. Citizens who expatriate after March 18th, 2010 can use these relief procedures. 
  2. One should have no filing history as a US Citizen or resident. 
  3. The citizens should have a net worth of less than $2 million at the time of expatriation and submitting. 
  4. Their aggregate tax liability for the year of expatriation and five prior years should be $25,000 or less. 
  5. You have to agree to complete and submit with your submission for renunciation all required federal tax returns for 6 years at issue including all schedules and information returns. The IRS recommends filing your FBAR's as well.
  6. Their failure to file required tax returns/ gift tax returns/ and other information returns (including Form 8938) and FBAR's or FinCEN Form 114 and pay taxes and penalties for the years under question was due to non-wilful conduct. 
  7. This action of renouncing a US citizenship is irrevocable. 
The IRS does not have a specific termination date at this time for these relief procedures. The IRS also plans on letting the applicant know that the submission was received and was complete. The IRS may take upto 2 months to turn this around. 

Renouncing your U.S. citizenship is a BIG step. If you are planning on renouncing your U.S. citizenship, we highly recommend that you meet with a knowledgeable Enrolled Agent or an attorney who specializes in this area. 

Bibliography: Expatriation Tax; IRS Announcement. 

Do not forget to read my disclaimer here. Please consult an Enrolled Agent for your unique tax needs. More of my contact information is on my website, www.mntaxbiz.com.





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