Relief For US Citizens Residing Abroad

The IRS has released additional guidance applicable to US citizens and dual citizens of the US and another country residing outside the US in the form of FS 2011-13 (the "Guidance").

This will come as a welcome relief to many US citizens residing outside the US, as it clarifies that there is a path to remedy any previous failure to file US tax returns and foreign bank account reporting forms without the imposition of penalties where either: (i) the taxpayer owes no US tax due to the application of the foreign earned income exclusion or foreign tax credits; or (ii) there is a US tax liability, but the taxpayer's failure to file was due to reasonable cause.

No US Tax Liability

The Guidance includes an example of a situation where a US citizen lives and works abroad, initially fails to file a US income tax return, and then subsequently files an accurate albeit late tax return showing no US tax liability due to the application of the section 911 foreign earned