US persons are required to file annual US tax returns regardless as to where they are living. Our blog below refers and explains how US persons who had not previously been aware of their US tax filing obligation could get back into the US tax filing system by filing 3 late US tax returns under the Streamlined Filing Program.
Streamlined filing compliance procedures delinquent US taxpayers
Some such US persons who have no intention of living in the US (and who may not feel any particular connection with the US other than their US citizenship) may decide to go one step further and look to expatriate from the US. To expatriate, you would need to have filed the last 5 US tax returns prior to the year of expatriation plus a final “dual-status” US tax return would be required in the year of expatriation (meaning at least 6 US returns would be required in total). Incidentally, we would recommend that anyone considering expatriating should always seek US immigration advice along with US tax advice.
Expatriating may not always be that straight forward and there are a number of considerations, and especially for those whose net worth is in excess of $2 million (equity in a UK London property alone can often mean an individual’s net worth exceeds this threshold)! Such individuals, may end up being subject to an exit tax where US tax on their net worth becomes payable upon expatriation! There are other criteria to consider and there are some exemptions from this exit tax in certain circumstances so consulting a US tax advisor is highly recommended (and of course we, are TAP, would be happy to have to assist).
For US persons whose net worth is less than $2 million and who have filed US returns for the last 5 years prior to expatriation, they should not ordinarily be subject to the US exit tax upon expatriating. However, they could still have been US taxes and tax penalties payable where tax liabilities had arisen. Please see below!
Relief Procedures
The IRS have recently issued a notice for former US Citizens with a net worth of less than $2 million (at the time of expatriation) and who expatriated after March 18, 2010. For such individuals, it may be possible to reclaim all US taxes if the aggregate of their US tax liabilities for the taxable year of expatriation and the five prior years was $25,000 or less.
These procedures may only be used by taxpayers whose failure to file required US federal tax returns (including certain other US tax forms) was due to non-wilful conduct. Non-wilful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law (i.e. simply not knowing )!
The link below is to the IRS’ website where this topic is discussed in further detail but please do contact us for a no obligation call should you think that you might require our assistance.
IRS relief procedures for certain former US citizens
