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The IRS Offshore Voluntary Disclosure Plan (OVDP) Expands Eligibility for Streamlined Version

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The IRS has recently expanded the eligibility requirements for streamlined OVDP. If you are a U.S. taxpayer with offshore accounts, the streamlined procedures could be beneficial for you, with some penalties waived.

To qualify for the streamlined procedures, you must certify that your conduct (not having reported foreign accounts) was “non-willful.” The IRS defines “non-willful” as negligent, inadvertent or due to a misunderstanding of the law.

Is this an opportunity to come into compliance in an organized, timely manner or, as is asked in this Forbes column, is it the government’s attempt “to entice unsuspecting taxpayers into placing their head onto the FBAR chopping block?”

Read the full article here.

U.S. Announced Revised Tax Amnesty Program

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This article from Investment Executive discusses more lenient revisions to the IRS tax amnesty program, and Cardinal Point’s Terry Ritchie comments on the benefits for Americans living in Canada. The changes are designed to encourage expats to fulfill their tax filing obligations in the U.S. Revisions to the existing amnesty program include the elimination of both the $1,500 annual maximum for owed taxes and the risk questionnaire. In addition, taxpayers will be required to certify that their previous failure to comply was non-willful.

According to Ritchie, “The IRS has now recognized that the previous programs really did not fit the traditional American in Canada client who most advisors work with.” While tax agencies in general are never pleasant to deal with, Ritchie sees these changes as a welcome relief to Americans living in Canada and their tax professionals. The changes will take effect July 1, the same day that the U.S. Foreign Account Tax Compliance Act (FATCA) is launched. Ritchie adds, “With the full implementation of FATCA at the beginning of next month, Americans in Canada would be finding it more difficult to hide from the IRS.” Read the full article here.

Americans Abroad Have Opportunity to File Previous Years U.S. Tax Returns

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This article from Cardinal Point’s Terry Ritchie highlights another opportunity for Americans abroad to voluntarily pay their U.S. taxes. The IRS is introducing improvements to two offshore account compliance programs in an effort to get non-filing and non-reporting expats to file U.S. tax returns, foreign bank reports and other IRS compliance forms from previous years. Since the first program’s inception, the IRS has collected $6.5 billion in taxes, interest and penalties from 45,00 taxpayers.

Program improvements include the elimination of the questionnaire and $1,500 threshold for the current Streamlined Program. Taxpayers must instead certify that failure to meet past filing and reporting obligations was due to “non-willful conduct.” In addition, Offshore Voluntary Disclosure Program (OVDP) changes include the elimination of the reduced penalty percentage for some taxpayers and a new requirement to submit all account statements. To read the full article and access more information on both programs, click here.

Tax Implications for Americans Living in Canada

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In this video clip, Terry Ritchie updates Rob Carrick on the IRS crackdown on Americans who live and work in Canada but haven’t been filing their annual tax returns. There is serious documentation required by U.S. tax authorities regarding financial holdings. Last September, a new program was introduced for Americans living and working abroad: the Offshore Volunteer Disclosure program. Of the 5 to 7 million Americans who live/work abroad, only 740,000 actually filed a Financial Bank Account Report (FBAR) in 2011.

While only 18 parties have been criminally prosecuted for hiding assets, clearly there is a large percentage that doesn’t know what to do or where to go for advice. Every situation is different, but it’s important to talk to a specialist who understands these issues. Next year, when the IRS imposes the Foreign Account Tax Compliance Act (FATCA), traditional banks in Canada must comply and provide information. Following this, it will be harder to fight reasonable cause. For most Americans working in Canada, there is a Foreigner Income Exclusion imposed on employment income. This, plus the use of foreign tax credits, generally means there are no taxes owed, but the proper documentation must be filed with the IRS to be in compliance.