U.S. amnesty of lapsed taxfilers

If you are an American living in Canada or a dual U.S.-Canada citizen and you are behind on filing your U.S. income tax returns, the Internal Revenue Service (IRS) has good news for you. The IRS ó the U.S. equivalent to the Canada Revenue Agency (CRA) ó has a plan that will help U.S. citizens residing overseas catch up on their tax filings and address issues with foreign retirement plans.

The U.S. requires that U.S. citizens regardless of where they live file income tax returns on their world-wide assets. Tax treaties (see Knowledge Bureau Report, June 20) among countries strive to eliminate double taxation. The IRS initiative will allow U.S. citizens who are low compliance risks to get current with their tax requirements without facing penalties or additional enforcement action. These people generally will have simple tax returns, says the IRS press release, and owe $1,500 or less in taxes for any of the covered years.

U.S. truant taxpayers will be required to file delinquent tax returns, with appropriate related information returns, for the past three years and to file delinquent Reports of Foreign Bank and Financial Accounts (FBARs) for the past six years. Submissions from taxpayers that present higher compliance risk will be subject to a more thorough review and potentially subject to an audit, which could cover more than three tax years.

In addition, the IRS will streamline the process for U.S. citizens and dual citizens who have contributed to RRSPs or Registered Retirement Income Funds (RRIFs) in Canada to take advantage of the provision in the Canada-U.S. Tax Treaty allowing deferral of taxation in the U.S. of income in those accounts.