Overseas Americans who have not filed taxes The U.S. IRS policy has been slightly relaxed

Overseas Americans who have not filed taxes The U.S. Internal Revenue Service (IRS) has slightly relaxed its policy (Alberta Times) According to the news released by the U.S. Internal Revenue Service (IRS) on December 7, life...

The U.S. Internal Revenue Service (IRS) slightly relaxes its policies for overseas Americans who have not filed taxes (Alberta Times) According to news released by the U.S. Internal Revenue Service (IRS) on December 7, Americans living abroad can breathe a little easier. If you can provide proof that you do not owe U.S. federal taxes, the penalty for not filing a tax return will be waived. In addition, the IRS hinted that it may take lenient penalties for tax filers who fail to report foreign bank and financial accounts (FBARs). No matter where you live and work, U.S. citizens or dual citizens of the U.S. and other countries need to file a tax return with the IRS every year. In addition to reporting income, they must also report all their foreign bank, mutual fund and pension account deposits. The U.S. government's requirement to declare foreign assets has caused a wave of panic among Americans living abroad who fear they will be punished for failing to file taxes. For example, for Americans living in Canada, by 2014, Canadian financial institutions will confirm to the IRS that accounts opened by U.S. citizens. Failure to declare foreign bank and financial accounts may result in an annual penalty of $10,000 per account. If it is found that the failure to report was intentional, a fine of US$100,000 or 50% of the total account balance may be imposed. Whichever of the two amounts is larger shall prevail. There are approximately 1 million Americans living in Canada. Many Americans stopped filing U.S. taxes after immigrating to Canada years ago because they thought they would pay higher taxes in Canada than in the United States. Generally speaking, if you live and work outside the United States, your foreign wages are fully or partially exempt from U.S. taxes. However, the amount of salary exemption varies each year. The foreign wages exemption for tax year 2012 is $95,100 and the exemption for tax year 2011 is $92,900. In this news release, the IRS stated that taxpayers who do not owe U.S. taxes (for example, foreign wages qualify as exempt or have filed taxes in their home country) will not face penalties for not filing taxes. In addition, if the IRS determines that there is a "reasonable cause", failure to declare foreign bank and financial accounts will also be exempted from fines. The determination of "reasonable grounds" is based on the facts and circumstances. If you can show that you did everything you could to comply with your tax obligations, but failed to meet the requirements, the IRS may be able to determine that there is "reasonable cause". In determining whether it is "reasonable cause," the IRS will consider all information available to you, including: *The reason you did not comply with your tax obligations; *Your tax history; *The time lag between your failure to comply with your tax obligations and subsequent compliance; *Circumstances beyond your control. "Reasonable excuse" may be: Based on the facts and circumstances, you were not aware of a specific obligation to file or pay taxes. Facts and circumstances may include: *Your education level; *Whether you have been required to pay taxes in the past; *Whether you have been penalized in the past; *If there have been any recent changes in tax forms or laws that you may not be aware of; *The complexity of tax laws. Wayne., a partner at Trowbridge Professional Corp, which specializes in international tax preparation. Wayne Bewick suggested that Americans in Canada who don't know whether they need to file a tax return would be better off filing a tax return. Because the authority to interpret "reasonable cause" rests with the IRS, and the debate over this interpretation is only getting more intense.