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New IRS relief procedures for some former citizens

RFP
Tax Hot Topics newsletterThe IRS announced new procedures on Sept. 6 for certain individuals who have relinquished, or intend to relinquish, their U.S. citizenship and who wish to come into compliance with their U.S. income tax and reporting obligations. Individuals may wish to come into compliance to avoid being taxed as a “covered expatriate” under Section 877A.

Generally, U.S. citizens who renounce or otherwise relinquish their citizenship must comply with federal tax requirements for the year of expatriation and for the five tax years prior to their expatriation. Under Section 877A, “covered expatriates” are treated as having disposed of all worldwide assets on the day before their expatriation date, and are required to pay an exit tax on the gain resulting from the deemed disposition of their worldwide assets. If expatriating individuals submit the information set forth in the procedures and meet the other requirements of these procedures, they will not be “covered expatriates” under Section 877A, nor will they be liable for any unpaid taxes and penalties for these years or any previous years.

Citizens who expatriate after March 18, 2010, and meet certain other requirements are eligible for these new procedures. These procedures are only available to U.S. citizens with a net worth of less than $2 million (at the time of expatriation and at the time of making their submission under these procedures), and an aggregate tax liability of $25,000 or less for the taxable year of expatriation and the five prior years. However, only taxpayers whose failure to file tax returns and pay taxes and penalties was due to non-willful conduct are eligible for these procedures.

The IRS is offering these procedures without a specific termination date and will make an announcement prior to terminating them. 

Contact
David Sites
Partner
Washington National Tax Office 
+1 202 861 4104

David Zaiken
Managing Director
Washington National Tax Office 
T +1 202 521 1543

Cory Perry
Senior Manager
Washington National Tax Office 
T +1 202 521 1509

Mike Del Medico
Manager
Washington National Tax Office 
T +1 202 521 1522
 
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