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Instructions for New Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers

On June 26, 2012, the IRS announced new streamlined filing compliance procedures for non-resident U.S. taxpayers to go into effect on Sept. 1, 2012.

These procedures are being implemented in recognition that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), Form TD F 90-22.1, but have recently become aware of their filing obligations and now seek to come into compliance with the law.

These new procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns.

The address provided for in the instructions for the Streamlined Filing Compliance Procedures may only be used for returns filed under these procedures. If you have already submitted tax returns through the Streamlined Filing Compliance Procedures, you must file subsequent year returns according to regular procedures. For more information, reference the appropriate form instructions.

Description of the New Streamlined Procedure

This streamlined procedure is designed for taxpayers that present a low compliance risk.

All submissions will be reviewed, but, as discussed below, the intensity of review will vary according to the level of compliance risk presented by the submission.

For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions.

Submissions that present higher compliance risk

Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program.

Taxpayers utilizing this procedure will be required to file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and to file delinquent FBARs (Form TD F 90-22.1) for the past six years.

Payment for the tax and interest, if applicable, must be remitted along with delinquent tax returns. For a summary of information about federal income tax return and FBAR filing requirements and potential penalties, see IRS Fact Sheet FS-2011-13. (December 2011).

In addition, retroactive relief for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by relevant treaty is available through this process. The proper deferral elections with respect to such arrangements must be made with the submission.

Under FATCA

Under FATCA, to avoid being withheld upon, foreign financial institutions (FFIs) may register with the IRS and agree to report to the IRS certain information about their U.S. accounts, including accounts of certain foreign entities with substantial U.S. owners

FFIs that enter into an agreement with the IRS to report on their account holders may be required to withhold 30% on certain payments to foreign payees if such payees do not comply with FATCA

The FATCA regulations exempt many categories of FFIs from the requirement to register and report, including

• Most governmental entities

• Most non-profit organizations

• Certain small, local financial institutions

• Certain retirement entities

FFIs include, but are not limited to:

• Depository institutions (for example, banks)

• Custodial institutions (for example, mutual funds)

• Investment entities (for example, hedge funds or private equity funds)

• Certain types of insurance companies that have cash value products or annuities

• Unless otherwise exempt, FFIs that do not both register and agree to report face a 30% withholding tax on certain U.S.-source payments made to them.

An FFI that registers on the “FATCA Registration Website” (“Website”), upon approval, will receive a Global Intermediary Identification Number (GIIN) from the IRS, unless the FFI is treated as a Limited FFI.