IRS Streamlining taxpayers with various locals...

The IRS has issued new procedures to help nonresident U.S. taxpayers, including dual Canadian citizens, comply with U.S. tax laws.

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The new rules, which were announced last Friday, eliminate civil penalties and make life easier for taxpayers who follow the IRS’s streamlined disclosure process. The program also provides retroactive elections for certain retirement plans and adds relief for Canadian citizens in the U.S.

The streamlined procedure is designed for taxpayers who present what the IRS considers to be a low compliance risk. 

Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.  That statement leaves a lot of wiggle room for the IRS!

The streamlined version of the 2012 program imposes no penalties and only requires the submission of three years of tax returns.

The streamlined procedure generally requires a submission of a questionnaire, along with the filing of federal income tax returns 2009-11 and submission of FBARs for the last six years.

Canadian citizens also benefit from the IRS’s new policy.

The new procedures are for nonresidents, including, but not limited to, dual citizens who have not filed U.S. income tax and information returns. They are available for nonresident U.S. taxpayers who have resided outside of the U.S. since Jan. 1, 2009 and who have not filed a U.S. tax return during the same period.