Your Pay: New Tax Program for Overseas Contractors

IRS has a New Tax Program for Overseas Contractors with Delinquent Taxes. The IRS has recently announced that it’s offering a new ‘tax catch up’ opportunities to American citizens and dual citizens who live abroad. The opportunity is not only limited to tax filing; relief is also offered for late compliance with FBAR (Reports of Foreign Bank and Financial Accounts).  The new procedures are scheduled to come into effect on September 1, 2012.

More details will come, but here is what is already offered by the IRS:

• The updated procedures will mimic those of the currently active Offshore Voluntary Disclosure Program.

• Taxpayers will be required to file all back taxes and relevant documentation for the previous 3 years and FBAR reports for 6 years.

• All submitted tax documentation and FBAR forms will be reviewed by an IRS representative and assessed whether to be low, moderate, or high risk for compliance.  Individuals who are deemed to be low risk will be on an automatic fast-track for approval, no penalties will be assessed, and no further action will be required of the taxpayer.

• If there is a justifiable reason why you were unable to file on time or you are requesting a deferral on a retirement account you may be asked to provide a written explanation.

  What does it mean to be Low Risk?

  Since ‘Low Risk’ participants will be free of additional penalties, it’s hard not to wonder what constitutes as ‘low risk.’  The IRS views returns with a minimal amount ($1,500) of taxes or no taxes due at all to be low risk.  The less tax liability, income, assets, and complexity of the return the lower the risk it poses to the IRS.  Conversely, the higher the tax liability and more complex of a return generally lead to a higher assessment of risk.  More details will be available in time, and a somewhat deeper explanation can be found on the IRS website.

  Learn More: http://www.taxesforexpats.com