IRS Relaxes Penalties for Accidental Tax Evasion by Americans Living Overseas
Last updated on August 26, 2014
A large number of U.S. citizens living overseas have renounced their U.S. citizenship because of the hefty penalty for tax evasion, intentional or not, and strict complying factors. Many others are left with the additional burden of complying with the U.S. tax laws or face heavy penalties and risk imprisonment.
Americans living overseas voiced their displeasure and difficulties through the media and other means. Now, to make tax laws fairer for taxpayers living overseas, the IRS has relaxed some of the tax rules for Americans living overseas, including reducing the penalty for accidental tax evasion.
Along with reducing the penalty for unintentional or accidental tax evasion, the IRS has also made it easier for taxpayers living overseas to apply and gain back compliance through their Offshore Voluntary Disclosure Program (OVDP). Through June, 2014, the IRS collected $6.5 billion through OVDP. Some 45,000 taxpayers participated in the OVDP since it began in 2009.
OVDP provides taxpayers the chance to disclosure their hidden assets and/or income to the IRS without the risk of heavy penalty and/or imprisonment. Under OVDP, a taxpayer can pay less in penalties for tax evasion and substantially reduce the possibility of imprisonment. With the strict complying factors of FATCA and heavy penalty, more and more taxpayers are expected to use OVDP to gain back compliance.
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