Flaherty said, “We told the U.S. government that the vast majority of Canadians targeted were honest, hard-working and law-abiding individuals and they listened. The only transgression of these dual citizens had been failing to file IRS paperwork that they were unaware they were required to file. I am happy the US government has listened to our concerns.”
In the past, if you worked overseas and have not submitted your tax returns for whatever reason, you needed to submit 6 years of delinquent tax returns or be subject to a penalty of $10,000 for a non-willful offence and up to $100,000 for a willful offence of non-submission. Under the revised regulations, you only need to submit 3 years of tax returns that you have not filed. Furthermore, if you are deemed to be of “low compliance risk” by the IRS i.e. someone who owes less than $1,500 in delinquent taxes, you will not be slapped with penalties for your non-payment. However, the requirement to file your Report on Foreign Bank and Financial Accounts (FBAR) along with your tax return still applies.
Ian Murphy of Miles & Co. Chartered Accountants said of the new regulations, “This latest pronouncement is even better than we expected as they are intending to waive penalties for those who owe $1,500 or less in tax for the disclosed years. In addition, it essentially cuts the compliance costs in half for those individuals who need to back-file as they have requested three years of US tax returns and related forms rather than the six years that was requested in the original voluntary disclosure initiative.”
If you live and work abroad, it is likely that you earn all your income from your host country and hence do not owe taxes to Uncle Sam because of offsetting foreign tax credits but filing tax returns and FBARs must still be carried out.