The US operates a worldwide system of taxation on its individual citizens and residents. This can often result in a number of Americans falling behind with their US tax obligations. This occurs when they have moved abroad and become fully compliant in their country of residence, or perhaps have only recently become aware of the obligation to file US tax returns due to place of birth, citizenship of a parent(s) or a work assignment in the US. Associated with that tax regime is an extensive system of information reporting relating to foreign bank accounts, financial assets, companies and trusts.
Failure to comply can trigger large penalties. That said, the IRS are keen for those who have not filed US tax returns in recent years to come back into the fold and become fully compliant, and have accordingly developed a framework to allow ‘non-willful’ taxpayers to get themselves into the system, and in many cases on a penalty free basis. However, the rules are quite specific and will depend on the amount of time you have spent in the US, where you live and crucially whether you can certify non-willfulness.
Follow this link to find out how the Internal Revenue Service explains this procedure.
If you do not fall within the streamlined provisions, perhaps because you are unable to certify that your failure to file is non-willful, then you may wish to consider the OVDP. This is aimed at clients who are looking for protection against criminal proceedings but also comes with a substantial penalty. We would recommend seeking legal advice if you feel that the OVDP is the route for you, and we are happy to refer you to lawyers who specialise in this area. We regularly work with lawyers to provide the tax compliance element of the disclosure.
In a limited number of cases, you may find that none of the formal programmes are suitable for your situation and a more informal route may be appropriate.
Our US tax specialists can help to accurately assess your position, advise on the most appropriate route for you to get back up-to-date, navigate you through the process, and prepare the necessary tax returns and disclosures on your behalf.
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