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US Citizens Living in Canada Have Yet Another Opportunity to Come Clean With the IRS

09/01/2012


Kevyn Nightingale is also featured in a Globe and Mail article, providing his insights on amnesty programs from the IRS.

In previous OVDI posts, I have reported on the recent flip-flopping of the IRS on the issue of Americans living abroad who haven’t filed US returns, but want to come clean.

OVDI Reinstated

The 2011 Offshore Voluntary Disclosure Initiative (OVDI) originally expired September 9, 2011, but in response to the calls from many practitioners, myself included, the IRS has reinstated it and made it permanent (while they reserve the right to cancel it at any time, for now it will continue indefinitely). You can read the full press release from the IRS – issued on January 9th, 2012 – here.

Few Changes for Most Americans Living in Canada

The program remains essentially the same, except that the penalty for the top-level individuals moves from 25% to 27.5%. This penalty rate generally affects people living in the US who have unreported assets and income offshore.

Most Americans living in Canada won’t be affected by this change – they will still be subject to the penalty of 5% of their liquid assets if they choose this disclosure route.

No Safe Harbour

It is possible to enter the OVDI and then opt out. The IRS has said in these cases, where there is "reasonable cause" it may abate penalties entirely, and reasonable cause may include ignorance of the requirement to file. At this time, there is no safe harbour; it’s up to the IRS' discretion in each individual case.

Further details will be announced within the next month. The IRS' OVDI FAQ page hasn’t been updated as of today, but it may be when you read this. In any event, I will keep you posted on further developments.

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