Three overseas advocacy organizations are responding positively to the Internal Revenue Service’s recent move to help dual citizens living abroad.

The IRS said last Tuesday that it plans to help U.S. citizens who reside in foreign countries catch up with their tax-filing obligations and offer assistance to those with foreign retirement plans (see IRS Pledges to Help Dual Citizens Meet Tax Obligations).

The three organizations—American Citizens Abroad, the Association of Americans Resident Overseas, and the Federation of American Women’s Clubs Overseas—have expressed their appreciation that the concerns they raised in a meeting with IRS officials this past April are being taken into consideration.  They were represented at the April meeting alongside Democrats Abroad and Republicans Abroad.

The IRS’s statement last week acknowledged that those Americans who were non-compliant due to ignorance of their U.S. tax obligations, and who owe little or no back taxes, will not be subjected to ruinous Foreign Bank Account Reporting, or FBAR, penalties. ACA and the AARO said they have heard from their worldwide members that many who entered into the IRS’s Offshore Voluntary Disclosure Program to rectify their situation were assessed fines of up to 25 to 50 percent of the total value of their accounts.  This level of penalty was put in place to combat criminals involved in money laundering and drug trafficking but it has often been indiscriminately applied to Americans living overseas who made honest mistakes.

“This is an important step forward and we commend the IRS and Commissioner Shulman for working to address the issue,” said ACA executive director Marylouise Serrato in a statement.   “However, ACA believes that IRS regulations should be further eased.  In particular, the threshold below which penalties are waived for back taxes owed should be raised from the current low $1,500, and more discretion should be applied in cases of non-compliance by Americans living abroad.” 

"We appreciate the attempt to accommodate Americans overseas who are ineligible for domestic tax-deferred savings and retirement plans,"  said FAWCO U.S. liaison and AARO president Lucy Stensland Laederich.  “Solutions must be found to avoid penalizing them for joining plans abroad when they are excluded from equivalent plans in the United States."

The organizations’ goal is to simplify the tax filing situation of Americans living overseas and ensure that Americans who have been non-compliant due to honest misunderstandings of their tax filing requirements will continue to come into the system.

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