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Regulation and Compliance > Federal Regulation > IRS

IRS Offers Relief to Ex-Citizens Who Owe Taxes

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IRS headquarters in Washington. (Photo: Bloomberg) IRS headquarters in Washington. (Photo: Bloomberg)

The Internal Revenue Service is offering individuals who have given up their U.S. citizenship and who have not paid back taxes a chance to get back into compliance with U.S. tax laws.

To get relief from paying U.S. taxes, these expatriated individuals must file all their outstanding U.S. tax returns for the past five years and the year that they became a noncitizen, the IRS said in a statement Friday.

The program is called the Relief Procedures for Certain Former Citizens and applies to a certain group of expatriated individuals.

The majority of the affected persons have been living in other countries for most of their lives, according to the IRS, and don’t know they owe tax returns to the federal government.

In general, those who give up their U.S. citizenship and don’t pay their taxes are held to the “significant tax consequences of the U.S. expatriation tax regime,” the IRS stated.

There are certain conditions to the offer. First, the offer is only extended to expatriated individuals, not estates, trusts or corporations and the like.

Second, they will have had to relinquished their citizenship after March 18, 2010.

Third, the tax lapses must be non-willful. Fourth, the expatriated persons must not be super-wealthy — they should owe limited back taxes — not over $25,000 for the six years covered, and have net assets of under $2 million.

Thus far, there is no termination date, but the IRS said it will announce one before ending the process.

The agency is creating a webinar to provide procedural tips and information on making submissions to the program.

“Relinquishing U.S. citizenship and the tax consequences that follow are serious matters that involve irrevocable decisions,” the IRS stated. It suggested that those interested in the program delve into all the materials and guidelines, including the extensive FAQs accompanying the program description, and even perhaps seek legal counsel before making any decisions.

To get started, the individuals must file a Form 8854, Initial and Annual Expatriation Statement, with their tax return for the year they expatriated from the U.S. and also and certify tax compliance for the previous five tax years, ensuring their federal tax returns have been completed accurately.

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