The Internal Revenue Service recently issued new, more streamlined accounting compliance
procedures to help nonresident U.S. taxpayers—including dual Canadian citizens—ensure they are properly observing accounting legislation
and other tax laws.
The new system, designed for taxpayers who present a low compliance risk, eliminates civil penalties, provides retroactive elections for specific retirement plans and expedites reviews.
"The streamlined version of the 2012 program imposes no FBAR (Foreign Bank and Financial Accounts) penalties and only requires the submission of three years of tax returns," said Jim Mastracchio, co-chair of the tax controversy practice at law firm BakerHostetler, in a statement
BakerHostetler counsel Jay Nanavati, a former tax division prosecutor for the Department of Justice, said the new version of the program "offers needed relief for Canadian citizens who live in the U.S. and failed to properly report their Canadian Retirement Plan."
That said, taxpayers who do not report income from offshore accounts will still face financial penalties and potentially even criminal charges.
"We have seen cases where a taxpayer is now facing criminal charges after attempting to make voluntary disclosures, but were ineligible because the IRS was already in possession of their foreign account information," said Mastracchio.
Specifically, the new program pertains to non-resident U.S. taxpayers, including dual citizens and those who have resided outside of the country since January 1, 2009, without filing a U.S. tax return during that period.Streamlining nonresident procedures on a state by state basis
In May, the American Institute of CPAs (AICPA) spoke out
in support of establishing a national standard for the withholding of state income taxes for nonresident employees, a move that furthered its consistent backing of the bill since last year, Accounting Today
notes. In a statement, AICPA president and CEO Barry Melancon advocated setting up a uniform rule for employees who work outside their resident states for a period of more than 30 days, pointing out that the current laws are fragmented due to state income tax withholding protocols and varying exemption periods.
"The change would make state income tax withholding easier to administer and would help ensure that states and local jurisdictions get the taxes they are owed," said Melancon.
Tax laws and accounting legislation can be complex for U.S. citizens and companies alike. Businesses can mitigate confusion by implementing accounting software
to help keep everything straight.