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Tax Relief for Expatriated Individuals


Relinquishing U.S. citizenship can have significant tax consequences for affected individuals, especially for those who gave up their citizenship without complying with U.S. tax law, as these individuals are subject to substantial penalties. In an effort to remedy this situation, the IRS recently implemented a series of new procedures that will help certain individuals who have relinquished their U.S. citizenship receive relief from back taxes, penalties, and interest. This offer of relief only applies to those who can satisfy specific eligibility requirements, so if you have questions about how the Relief Procedures for Certain Former Citizens applies to you, it is important to contact the tax and IRS law attorney Ronald Cutler who is well-versed in the new regulations and can advise you accordingly.

The Applicability of the New Regulations

All U.S. citizens, whether or not they live in the U.S., must report and pay the IRS for taxes on their worldwide income, including any income from foreign financial assets. Failing to comply with these rules can have serious consequences, including the assessment of interest and penalties. Fortunately for those who have resided outside of the country for the majority of their lives (and may not have known that they had certain tax obligations), the newly instituted procedures help eligible individuals who have relinquished their U.S. citizenship, avoid being taxed as covered expatriates. However, only individuals who also satisfy the following requirements are eligible for this form of relief;

  • Have relinquished their U.S. citizenship any time after March 18th of 2010;
  • Have not filed a tax return as a U.S. citizen or resident;
  • Owe $25,000 or less in tax liability for the taxable year of their expatriation and the preceding five years; and
  • Have net assets of less than $2 million at the time of expatriation.

Those who fail to apply for relief could find themselves taxed as covered expatriates, which means that they will be required to pay a mark-to-market exit tax on any gain in value of their worldwide assets and will also be subject to additional consequences in regards to deferred compensation items and trust distributions.

How to Take Advantage of Relief Procedures

Eligible individuals who believe that they qualify for the IRS’ new relief procedures must take certain preliminary steps. For instance, qualifying individuals must submit any outstanding tax returns, including both required schedules and information returns for:

  • The preceding five years; and
  • The year of their expatriation.

As long as a taxpayer’s tax debt does not total more than $25,000 for those six years and his or her failure to comply with federal law was non-willful, that individual could be relieved of the need to pay taxes, and will also avoid being assessed interest and penalties for those years. Fortunately, non-willful conduct also includes any conduct that can be chalked up to negligence, mistake, inadvertence, or a good faith misunderstanding of the law’s requirements.

Call a Florida Tax Attorney Today

Although the IRS has not yet specified a date for the termination of this relief offer, it is still a good idea for eligible individuals to apply as soon as possible. Failing to do so could result in a person missing out on the opportunity to avoid hefty fines and penalties. To learn more about tax relief options for expatriated individuals, please contact dedicated Florida tax & IRS lawyer Ronald Cutler, P.A. at 386-490-9949 today.