The Internal Revenue Service usually likes to get its hands on as much money as possible. Even individuals who live outside the United States may have a tax obligation they must meet. Still, for those who have renounced their U.S. citizenship, some tax relief may be possible.
On September 6, 2019, the IRS announced a change to how it handles the tax liability of certain expatriates. If you are no longer living in the country and have renounced your citizenship, you may be able to take advantage of the process change. Nevertheless, the new procedure has a limited scope, so you should be certain you understand its intricacies before ignoring your tax responsibility.
Coverage
To be eligible for the IRS’s relief procedure, you must be a U.S. citizen who renounced your citizenship on or after March 18, 2010. You must also have a tax burden of under $25,000 during the previous six years. Further, you may not have assets totaling more than $2 million. Finally, you must have not filed a tax return as a U.S. citizen or resident. If you willfully failed to file a required tax return, you are likely not eligible for the relief program, however.
Process
To take advantage of the expatriate relief process, you must file all tax returns for the five-year period before you renounced your U.S. citizenship. As long as your tax liability does not exceed $25,000, the IRS may waive payment. If you qualify, the IRS is also likely to forget penalties and interest that you may otherwise have to pay for delinquent tax filings.
Timing
The relief policy is not likely to last forever. Even though the IRS has not yet announced when it plans to stop offering relief, the agency has indicated that a closing date is on the horizon. Therefore, if you want to take advantage of the protection the policy offers, you probably must act quickly.
While an important form of relief for some taxpayers, the expatriation relief procedure does not apply to everyone. Still, if you worry about your tax obligation and no longer live in the United States, it may be worth exploring whether you qualify for this relief.