Tax Alert – U.S.

September 18, 2019

The U.S. Internal Revenue Service (IRS) announced new procedures on September 6, 2019 enabling certain individuals who relinquished their U.S. citizenship to come into compliance with their U.S. tax and filing obligations and receive relief for back taxes.

The relief procedures will be applicable to individuals whose past compliance failures were non-willful, provided they:

• Have not filed U.S. tax returns as U.S. citizens or residents;
• Owe a limited amount of back taxes to the U.S.; and,
• Have net assets of less than US$2 million.

Many of these individuals may have lived outside the U.S. most of their lives and may have not been aware that they had U.S. tax obligations. Individuals who relinquished their U.S. citizenship any time after March 18, 2010 are eligible, provided they satisfy the other criteria of the procedures.

Eligible individuals wishing to use these relief procedures are required to file outstanding U.S. tax returns, including all required schedules and information returns, for the five years preceding and their year of expatriation. Provided the taxpayer’s tax liability does not exceed a total of US$25,000 for the six years in question, the taxpayer is relieved from paying U.S. taxes. Individuals who qualify for these procedures will not be assessed penalties and interest.

The IRS has not designated a specific termination date for these relief procedures. A closing date will be announced prior to ending the procedures.

These procedures are only available to individuals. Estates, trusts, corporations, partnerships and other entities may not use these procedures.

Taxpayers who relinquish citizenship without complying with their U.S. tax obligations are subject to the significant tax consequences of the U.S. expatriation tax regime. Additional information, including FAQs, can be found with this link: Relief Procedures for Certain Former Citizens.

For more information, contact a member of MNP’s U.S. Taxation Services team at mnp.ca. We can help determine your eligibility for relief and navigate the process.