The Internal Revenue Service has in place a plan to help United States citizens residing abroad with their taxes. U.S. citizens abroad, including dual citizens now have more access to help with tax obligations, and for those citizens with foreign retirement plans, resolving pension issues.
This new plan went into effect on September 1, 2012, and the 2012 tax year will be the trial run. The IRS has provided new options so that U.S. citizens abroad who may have fallen behind on filing tax returns can catch up with their obligations. However, this only applies to U.S. citizens who are low compliance risks and owe $1,500 or less in tax for any year.
The most common mistake that U.S. citizens living overseas make with their taxes is either not filing their Federal Income Tax Returns or Reports of Foreign Bank and Financial Accounts (FBARs). The IRS has recently overhauled the FBAR guidance (https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-(FBAR)), so that taxpayers can better understand the requirements.
The IRS has also announced that, along with personal income tax, there would be new rules related to some foreign retirement plans. The IRS has streamlined procedures to allow low compliance risk situations be resolved, even if this was not an option previously.
U.S. taxpayers living abroad who want to take advantage of these changes have to follow guidelines set out by the IRS. Taxpayers need to file any delinquent tax returns for the current and previous three years, and file any delinquent FBARs for the past six years. Taxpayers who are not low compliance and submit their delinquent income tax returns and FBARs will be reviewed with higher standards, and risk the chance of an audit.
U.S. citizens living abroad face many challenges while dealing with the U.S. Tax Code. An experienced New York Tax Attorney can help deal with the complexities of back taxes and other tax issues within the U.S.