Former U.S. Citizens May Qualify for Federal Tax Relief under New Procedures

The Internal Revenue Service (IRS) recently announced the "Relief Procedures for Certain Former Citizens," which will allow certain individuals to come into compliance with their U.S. tax and filing obligations. The procedures apply to individuals who are former U.S. citizens or who intend to relinquish citizenship, have not filed U.S. tax returns as citizens or residents, owe a limited amount of back taxes, and have net assets under $2 million. There is also a willfulness component to consider.

According to the IRS, "some U.S. citizens, born in the United States to foreign parents or born outside the United States to U.S. citizen parents, may be unaware of their status as U.S. citizens or the consequences of such status. By law, U.S. citizens, regardless of whether they live in the United States or abroad, are required to report and pay to the Internal Revenue Service (IRS) all applicable taxes on their worldwide income, including on their income from foreign financial assets." The new procedures are designed to help such individuals avoid being taxed as a "covered expatriate," which may lead to "significant tax consequences."

There is no specific termination date yet for these procedures, and they are open to qualified individuals who relinquished their U.S. citizenship after March 18, 2010. For more information, read the IRS press release here.

To discuss your U.S. tax filing obligations and compliance strategies, contact one of our attorneys today.

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