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In June of 2012 the IRS announced streamlined procedures for non-resident US taxpayers (often applicable for Canadian tax residents with US citizenship) who wanted to become compliant with their US tax returns for prior years.

The streamlined procedures came into effect on September 1, 2012 and unlike prior years the IRS has developed specific procedures for non-resident US tax payers to become compliant with their US returns

The new procedures are intended for taxpayers that the IRS considers “low compliance risk”. Generally speaking a taxpayer will be considered “low risk” if the amount of US tax owing for any particular year filed is under $1,500 (discuss with a professional other factors for compliance risk assessment that may also be considered by the IRS)

To be eligible for the streamlined procedures the taxpayer must:

    • Be considered “low compliance risk”
    • Have resided out of the US since January 1, 2009
    • Must have a valid US tax identification number

 

A summary of the streamlined procedures are as follows:

    • Submit complete and accurate US tax returns for the last 3 years
    • Submit any taxes owing for those years
    • If applicable submit complete and accurate FBARs (form TDF 90-22.1)
    • Submit a copy of the new streamlined filing questionnaire
    • Submit relevant late filing treaty elections e.g. Canadian RRSP deferrals

 

Note that the procedures listed above are general guidelines only and each taxpayer’s situation and requirements will vary according to circumstance. Consult a competent tax professional before assessing your tax filing requirements under the new streamlined tax filing procedures.

To discuss your US tax filing obligations and to assess if you’re eligible for the new streamlined US tax filing procedures please call us at 250-381-2400 or you can contact us electronically here.

 

 

4 Responses to “New September 2012 Streamlined Filing Procedures for Non-Resident US Taxpayers”

  1. Moore says:

    Hi Phil;
    I’m confused about the years of FBARs required. Is it 6 years in total (ex. 2006-2011), or 2005-2010 + 2011) ? The 2005 would have expired due to the SOL – would they request it anyway?

    And, the economic stimulus program in the ’09 and ’10 tax years might result in a refund to people who might not ordinarily have qualified for one. But claiming a refund (see question on the questionnaire) disqualifies one from participating in this streamlined filing process. If the math on the return comes out to a refund, does the person just not ‘claim’ it at the end, so it will have to show on the return form that they would actually qualify for it, but then they just don’t actually ask for or ‘claim’ it on the line 73a, in order to still be able to use this streamlined process?
    Thanks.

    • admin says:

      Hi

      You’ll need to submit FBARs for 2006 to 2011 under the new streamlined procedures.

      You are correct. For some reason the IRS is putting taxpayers in a “high risk” category if they claim a refund in any of the years. For this reason I’ve been excluding these non-refundable claims on my client’s returns (even though they are eligible).

      Hope that helps.

      Cheers

      Phil

  2. admin says:

    Hi John

    Essentially there’s 2 ways you can probably prepare the returns. 1) exempt up to $91,500 via form 2555 and claim a foreign tax credit for the remaining income. 2) Take a full foreign tax credit for the Canadian taxes you paid on the $180,000 of income (I’m assuming it’s employment income).

    If your average Canadian tax rate is higher than your US tax rate it is probably easiest to tax the full amount of the 1040 and claim a foreign tax credit for the Canadian taxes you paid on the income.

    Hope that helps.

    Cheers

    Phil
    250-381-2400

  3. John C says:

    Hi

    I’m a US citizen living in Ottawa and I’ve been waiting for this news to get caught up on my US tax returns.

    I’ve already prepared 1040 tax returns for 2009 to 2011 however I have more than $1,500 of taxes owing for 2010.

    My income is around $180,000 and I’m only able to exempt about $92,000 of my income resulting in much more than $1,500 of US tax owing.

    Does this mean I’m considered high risk in the eyes of the IRS?

    I heard that I’m allowed to deduct my Canadian taxes on schedule A to reduce my income, is that correct?

    Any help would be appreciated.

    Thanks

    John

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