Global Tax Adviser
December 13, 2011
Accidental Americans — IRS Penalty Relief for Tax
Returns and FBAR
Toronto, U.S. Corporate Tax
Toronto, International Executive Services
The IRS has provided relief and
guidance for U.S. citizens or dual citizens residing outside the United
States who did not file a required U.S tax return or Report of Foreign Bank
and Financial Accounts (FBAR) by December 7, 2011. Penalties will not be
imposed in all cases, according to a three-page fact sheet that summarizes
federal income tax return and FBAR filing requirements and potential
According to the fact sheet, taxpayers with outstanding tax returns who owe
no U.S. tax will not be assessed with penalties for a failure to file a return or a failure
to pay tax.
Where taxpayers with outstanding tax returns do owe tax, the IRS says
reduce or waive penalties where the taxpayer is able to show that the
failure to file or pay was “due to reasonable cause and not due to willful
neglect”. Similarly, no FBAR penalty applies if the violation was
“due to reasonable cause”.
The fact sheet notes that taxpayers only have to file
tax returns and FBARs going back six years.
In the fact sheet, the IRS provides examples of the information, facts and
circumstances that it will use to determine whether a taxpayer’s failure to
file a tax return or FBAR was due to “reasonable cause”. However, it is not
clear how this policy will be interpreted and applied.
Further details pending?
The IRS may release additional guidance in the future, as it has
stated that it is still considering the topics discussed in the fact sheet
and will provide additional information as it becomes available.
For more information, contact your KPMG adviser.