Procedures for Non-Resident, Non-Filer U.S. Taxpayers

On June 26, 2012, the IRS announced new streamlined filing compliance

procedures for non-resident U.S. taxpayers to go into effect on September 1,

2012. These procedures are being implemented in recognition that some U.S.

taxpayers living abroad have failed to timely file U.S. federal income tax returns

or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-

22.1, but have recently become aware of their filing obligations and now seek to

come into compliance with the law. These new procedures are for non-residents

including, but not limited to, dual citizens who have not filed U.S. income tax and

information returns.

Description of the New Streamlined Procedure:

This streamlined procedure is designed for taxpayers that present a low

compliance risk. All submissions will be reviewed, but, as discussed below, the

intensity of review will vary according to the level of compliance risk presented by

the submission. For those taxpayers presenting low compliance risk, the review

will be expedited and the IRS will not assert penalties or pursue follow-up

actions. Submissions that present higher compliance risk are not eligible for the

streamlined processing procedures and will be subject to a more thorough review

and possibly a full examination, which in some cases may include more than

three years, in a manner similar to opting out of the Offshore Voluntary

Disclosure Program.

Taxpayers utilizing this procedure will be required to file delinquent tax returns,

with appropriate related information returns (e.g. Form 3520 or 5471), for the

past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past

six years. Payment for the tax and interest, if applicable, must be remitted along

with delinquent tax returns. For a summary of information about federal income

tax return and FBAR filing requirements and potential penalties, see IRS Fact

Sheet FS-2011-13. (December 2011).

In addition, retroactive relief for failure to timely elect income deferral on certain

retirement and savings plans where deferral is permitted by relevant treaty is

available through this process. The proper deferral elections with respect to such

arrangements must be made with the submission. See instructions below.

Eligibility:

This procedure is available for non-resident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009 and who have not filed a U.S. tax International Taxes Weekly return during the same period. These taxpayers must present a low level of compliance risk as described below Amended returns submitted through this program will be treated as high risk returns and subject to examination, except for those filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by

relevant treaty. It should be noted that this relief is also available under the Offshore Voluntary Disclosure Program. See below for the information required to be submitted with such requests. (If you need to file an amended return to correct previously reported or unreported income, deductions, credits, tax etc, you should not use this streamlined procedure. Depending on your

circumstances, you may want to consider participating in the Offshore Voluntary

Disclosure Program.)

All tax returns submitted under this procedure must have a valid Taxpayer

Identification Number (TIN). For U.S. citizens, a TIN is a Social Security Number

(SSN). For individuals that are not eligible for an SSN, an Individual Taxpayer

Identification Number (ITIN) is a valid TIN. Tax returns filed without a valid SSN

or ITIN will not be processed. For those who are ineligible for an SSN, but who

do not have an ITIN, a submission may be made through this program if

accompanied by a complete ITIN application. For information on obtaining an

SSN, see www.ssa.gov. For information on obtaining an ITIN, see the ITIN

page.

Compliance Risk Determination:

The IRS will determine the level of compliance risk presented by the submission

based on information provided on the returns filed and based on additional

information provided in response to a Questionnaire required as part of the

submission. Low risk will be predicated on simple returns with little or no U.S. tax

due. Absent any high risk factors, if the submitted returns and application show

less than $1,500 in tax due in each of the years, they will be treated as low risk

and processed in a streamlined manner.

The risk level may rise if any of the following are present:

 If any of the returns submitted through this program claim a refund;

 If there is material economic activity in the United States;

 If the taxpayer has not declared all of his/her income in his/her country of

residence;

 If the taxpayer is under audit or investigation by the IRS;

 If FBAR penalties have been previously assessed against the taxpayer or

if the taxpayer has previously received an FBAR warning letter;

 If the taxpayer has a financial interest or authority over a financial

account(s) located outside his/her country of residence;

International Taxes Weekly

 If the taxpayer has a financial interest in an entity or entities located

outside his/her country of residence;

 If there is U.S. source income; or

 If there are indications of sophisticated tax planning or avoidance.

For additional information about what information will be requested to evaluate

risk, please see the Questionnaire.

Instructions for Using This Procedure:

Taxpayers wishing to use these streamlined procedures must:

1. Submit complete and accurate delinquent tax returns, with appropriate

related information returns, for the last three years for which a U.S. tax

return is due.

a. Please note that all delinquent information returns being filed under

this procedure should be sent to the address below with the rest of

the submission.

2. Include at the top of the first page of each tax return “Streamlined” to

indicate that the returns are being submitted under this procedure. This is

very important to ensure that your returns get processed through

these procedures.

3. Submit payment of all tax due and owing as reflected on the returns and

statutory interest due and owing.

a. For returns determined to be high risk, failure to file and failure to

pay penalties may be imposed in accordance with U.S. federal tax

laws and FBAR penalties may be imposed in accordance with U.S.

law. Reasonable cause statements may be requested during

review or examination of the returns determined to be high risk.

For a summary of information about federal income tax return and

FBAR filing requirements and potential penalties, see IRS Fact

Sheet FS-2011-13 (December 2011).

4. Submit complete and accurate delinquent FBARs for the last six years for

which an FBAR is due.

a. Please note that all delinquent FBARs being filed under this

procedure should be sent to the address below with the rest of the

submission and not to the Detroit address where timely filed FBARs

are submitted.

5. Submit a complete, accurate, and signed Questionnaire.

6. If the taxpayer must apply for an ITIN in order to file delinquent returns

under this procedure, the application and other documents required for

applying for an ITIN must be attached to the the required forms,

information, and documentation required under this streamlined

procedure. See the ITIN page for more.

7. Any taxpayer seeking relief for failure to timely elect deferral of income

from certain retirement or savings plans where deferral is permitted by

relevant treaty will be required to submit:

a. a statement requesting an extension of time to make an election to

defer income tax and identifying the pertinent treaty provision;

b. for relevant Canadian plans, a Form 8891 for each tax year and

each plan and a description of the type of plan covered by the

submission; and

c. a dated statement signed by the taxpayer under penalties of perjury

describing:

i. the events that led to the failure to make the election,

ii. the events that led to the discovery of the failure, and

iii. if the taxpayer relied on a professional advisor, the nature of

the advisor’s engagement and responsibilities.

8. This program has been established for non-resident non-filers. Generally

amended returns will not be accepted in this program. The only amended

returns accepted through this program are those being filed for the sole

purpose of submitting late-filed Forms 8891 to seek relief for failure to

timely elect deferral of income from certain retirement or savings plans

where deferral is permitted by relevant treaty. Non-resident taxpayers

who have previously filed returns but wish to request deferral provisions

will be required to submit:

a. an amended return reflecting no adjustments to income deductions,

or credits; and

b. all documents required in item 7 above.

9. The documents listed above must be sent to:

Internal Revenue Service

3651 South I-H 35

Stop 6063 AUSC

Attn: Streamlined

Austin, TX 78741

Other Considerations:

Taxpayers who are concerned about the risk of criminal prosecution should be

advised that this new procedure does not provide protection from criminal

prosecution if the IRS and Department of Justice determine that the taxpayer’s

particular circumstances warrant such prosecution. Taxpayers concerned about

criminal prosecution because of their particular circumstances should be aware

of and consult their legal advisers about the Offshore Voluntary Disclosure

Program (OVDP), announced on January 9, 2012, which offers another means

by which taxpayers with undisclosed offshore accounts may become compliant.

For additional information go to the OVDP page. It should be noted, however,

that once a taxpayer makes a submission under the new procedure described in

International Taxes Weekly

this document, OVDP is no longer available. It should also be noted that

taxpayers who are ineligible to use OVDP are also ineligible to participate in this

procedure.

—NAME

Streamlined Filing Compliance Procedures for

Non-Resident, Non-Filer Taxpayers Questionnaire

ADDRESS

TIN

TAX YEARS      YEAR:                                 YEAR:                       YEAR:

Please respond to the following questions by checking YES or NO or providing the requested

information.

ELIGIBILTY                                                                                         

         YES    NO

1.  Have you resided in the U.S. for any period of time since January 1,

2009?

2.  Have you filed a U.S. tax return for tax year 2009 or later?

3.  Do you owe more than $1,500 in U.S. tax on any of the tax returns you are submitting through

this program?

4.  If you are submitting an amended return (Form 1040X) solely for the purpose of requesting a

retroactive deferral of income on Form 8891, are there any adjustments reported on the amended

return to income, deductions, credits or tax?

If you answered yes to questions 1, 2 (except for taxpayers submitting amended returns solely for

the purpose of requesting a retroactive deferral of income on Form 8891), 3, or 4, any returns

submitted through this program will not be eligible for the streamlined processing procedures and

will be treated as high risk returns subject to an examination.  If your answer is yes to any of

these questions, you may want to consider a submission through the Offshore Voluntary Disclosure

Program.

FINANCIAL ACCOUNTS/ENTITIES

5.  Since January 1, 2006, have you had a financial interest in or signature or other authority

over any financial accounts located outside your country of residence?

a.  If yes, are the accounts held in your name?

b. If yes, list the countries where the accounts were/are held.

6.  Since January 1, 2006, did you have a financial interest in any entities located outside your

country of residence?

a.  If yes, do these entities control U.S. investments?

b.  If yes, list the countries where the entities were/are located.

7.  Do you have a retirement account located in your country of residence?

a.  If yes, are earnings from the retirement account non-taxable in the

U.S. under current treaty provisions?

b.  If yes, is the retirement account located in Canada and are you filing a delinquent Form 8891

for each year?

TAX ADVISORS8.  Did you rely on the advice of a tax professional for not filing required

U.S. tax returns?

a.  If yes, is your tax advisor located in the U.S.?

9.  During the above-listed tax years for this submission did you know that you were a U.S. citizen

or resident alien?

a.  If yes, did you disclose to your tax professional that you were a U.S. citizen or resident

alien?

10.  During the above-listed tax years for this submission, have you declared all of your income in

your country of residence?

11.  If you used a tax professional, did you disclose the existence of the accounts/entities you

hold outside your country of residence to your tax professional?

12.  Did you know you had a Report of Foreign Bank and Financial Accounts (FBAR), Form TD F

90-22.1, filing requirement when you failed to file an FBAR?

TAX POSITION

13.  Have you ever filed a U.S. tax return?

14.  Are you currently under audit or investigation by the IRS?

15.  Have you ever filed an FBAR?

16.  Have you received an FBAR warning letter for any of the above- listed tax years for failing to

file an FBAR?

17.  Do you have a treaty-based position for your country of residence that reduces your U.S. tax

liability?

18.  Were you employed by a U.S. company or entity during any of the above-listed tax years?

19.  During any of the above-listed tax years, did you receive income from any of the following

income sources in your country of residence:  rental income, sales of property, inheritance?

20.  Are you claiming a refund on any of the returns you are submitting through this program?

Under penalties of perjury, I declare that I have examined the facts stated in this Questionnaire

and to the best of my knowledge and belief, they are true, correct and complete.

Taxpayer(s) Signature(s)                                                Date

New streamlined compliance offer for low-risk noncompliant non-resident taxpayers

IRS has issued instructions and a questionnaire to be used by eligible non-resident U.S. taxpayers who want to catch up on past-due filing requirements under new streamlined filing procedure that took effect on Sept. 1, 2012. They are for certain “low-risk” U.S. taxpayers living abroad who haven't timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), and now want to come into compliance. The new compliance procedures will also provide assistance for eligible taxpayers with foreign retirement plan issues.

Background. Individuals subject to tax fall into three subdivisions: (1) U.S. citizens; (2) resident aliens; and (3) non-resident aliens. (Reg. § 1.1-1(b)) A citizen is, in general, taxable on all income, whether derived from sources within or without the U.S. Major exceptions to this rule relate to certain income earned while working abroad and to certain income derived from U.S. possessions. A resident alien's tax liability, with certain exceptions, is the same as that of a citizen. Nonresident aliens are taxed on their investment type income from U.S. sources and on certain income “effectively connected” with a U.S. business whether from U.S. or from foreign sources.

Each U.S. person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, f the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship each calendar year by filing TD F 90-22.1, Report of Foreign Bank and Foreign Accounts (FBAR) with Treasury on or before June 30, of the succeeding year.

In general, the civil and criminal penalties for noncompliance with the FBAR filing requirements are significant. Civil penalties for a non-willful violation can range up to $10,000 per violation, and civil penalties for a willful violation can range up to the greater of $100,000 or 50% of the amount in the account at the time of the violation. Criminal penalties for violating the FBAR requirements while also violating certain other laws can range up to a $500,000 fine or 10 years imprisonment or both. Civil and criminal penalties may be imposed together. The authority to enforce these assessments has been delegated to IRS.

 Under the offshore voluntary disclosure initiative (OVDI) currently in effect, IRS won't impose certain penalties on taxpayers with unreported offshore income if the applicable requirements are met.

New streamlined filing compliance procedures. IRS has released streamlined filing compliance procedures for non-resident U.S. taxpayers in recognition that some of them have failed to timely file U.S. federal income tax returns or FBARs, but have recently become aware of their filing obligations and now seek to come into compliance with the law. The new compliance procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns. It's open to non-resident U.S. taxpayers who have resided outside of the U.S. since Jan. 1, 2009 and who have not filed a U.S. tax return during the same period. These taxpayers must present a low level of compliance risk, i.e., submitted returns and the application must show less than $1,500 in tax due in each of the years involved. For those taxpayers presenting low compliance risk, the review will be expedited and IRS will not assert penalties or pursue follow-up actions.

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, or 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations), for the past three years. They also must file delinquent FBARs for the past six years, and complete a special questionnaire. Payment for taxes and interest, if applicable, must be remitted along with delinquent tax returns.

For relief from the failure to timely elect deferral of income from certain retirement or savings plans (where permitted under a treaty), taxpayers will need to submit: a request for an extension of time pursuant to an identified treaty provision; Form 8891 U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans, for each tax year and each plan, with a description of the plan (only for Canadian plans only); a dated and taxpayer signed (under penalties of perjury) statement explaining the events that led to the failure to make the election, events that led to the discovery of the failure, and where the taxpayer relied on a professional advisor, an explanation of the nature of the tax advisor's engagement and responsibilities.

Higher risk level submissions. IRS cautions that the risk level may rise if any of the following elements are present:

Any of the returns submitted through the program claims a refund;

There is material economic activity in the U.S.

The taxpayer has not declared all of his/her income in his/her country of residence, or is under audit or investigation by IRS;

FBAR penalties have been previously assessed against the taxpayer or if he/she has previously received an FBAR warning letter;

The taxpayer has a financial interest or authority over a financial account(s) located outside his/her country of residence;

The taxpayer has a financial interest in an entity or entities located outside his/her country of residence

There is U.S. source income; or

There are indications of sophisticated tax planning or avoidance.

IRS says submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the OVDI.

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