On June 18, 2014, the US Internal Revenue Service (IRS) announced changes to its offshore voluntary compliance programs that are expected to significantly increase the number of US persons that can participate in these programs.
The announcement responds to criticism from US taxpayers and the IRS’s own Taxpayer Advocacy Service. It is good news for US citizens living in Canada who are struggling with how to meet their US filing obligations. The latest changes make it easier for those US citizens who have filed their Canadian tax returns and paid all of their Canadian taxes while living in Canada.
Two IRS programs have allowed US persons who have not complied with their US filing obligations to come forward and avoid criminal prosecution and substantial penalties:
To use the streamlined process, a taxpayer must still file three years of past US federal tax returns and six years of past Foreign Bank Account Reports (FBARs).
However, the recent changes:
As with the previous program, individuals will be granted retroactive relief for failing to timely elect income deferral on certain RRSPs where the election is permitted under a treaty.