Changes for American citizens – an amnesty ends


If you are an American citizen or Green Card holder living in New Zealand you should be aware that you need to continue filing your US tax returns each year, regardless of how long you have been away from the US. The US is one of only two countries in the world that continues to tax its long-term absentees on the basis of their citizenship (the other being Eritrea!) and this means that, every year, US citizens are required to file a US tax return…and many don’t realise this.

In most cases, there will be little or no US tax payable due to the availability of exclusions against employment or business income and the availability of foreign tax credits, but US citizens are still getting a nasty shock when they realise that they may have many years of tax delinquency behind them. Most recently, this realisation has come about because of stringent new reporting requirements imposed on New Zealand banks and other financial institutions.

Under the provisions of the US Foreign Account Tax Compliance Act (FATCA) and the more recently introduced OECD Common Reporting Standards (CRS) everyone’s global financial assets are now far more visible. Where a New Zealand bank or other financial institution holds information indicating that you may have connections to another country they are likely to contact you and ask you to confirm your tax residence. For most people, this is a simple matter as long-term absence from a country will generally mean that you are no longer a tax resident. However, because the US applies taxation based on citizenship, US nationals will almost always still be US tax residents. New Zealand financial institutions will therefore have an obligation to report your financial interests to the New Zealand Inland Revenue, who in turn will report to the US Inland Revenue Service.

Until recently, US citizens have been able to rectify their delinquent filing position under either the Offshore Voluntary Disclosure Program (OVDP) or the Streamlined Foreign Offshore Procedures. Put simply, you must file the three most recent delinquent returns and the current outstanding return (returns for calendar years 2014, 2015, 2016 and 2017) under the Streamlined Foreign Offshore Procedures, and potentially also Foreign Bank Account Reporting forms for the last 6 years, where relevant, under the delinquent FBAR submission procedures. 

The Offshore Voluntary Disclosure Program (OVDP) is a voluntary disclosure program specifically designed for taxpayers with exposure to potential criminal liability and/or substantial civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect of those assets.  The Streamlined Foreign Offshore Procedures is for taxpayers who might not have been aware of their filing obligations, and for whom their non-compliance was not willful. 

However, the US Internal Revenue Service has recently announced that current amnesty under the Offshore Voluntary Disclosure Program for delinquent US tax filers will close on 28 September 2018. They have also indicated their intent to close down the Streamlined Foreign Offshore Procedures.  This means that US citizens and Green Card holders living in New Zealand should bring their US tax affairs up to date as soon as possible.

Once the amnesty ends, delinquent tax filers will have little or no protection from financial penalties of not having filed their US tax returns…and a combination of New Zealand financial institutions and the New Zealand Inland Revenue will be helping the IRS gather the relevant information needed to pursue people.

If you are a US citizen or Green Card holder living in New Zealand, and you need help bringing your US tax affairs up to date contact TaxBridge Limited for further information.

© TaxBridge Limited 2018

PO Box 100, Waikawa Bay, Picton, 7251

021 816541

This publication contains generic information only and TaxBridge Limited is not providing any specific advice. TaxBridge Limited is not responsible for any loss sustained by anyone relying on the contents of this publication. TaxBridge Limited recommends that specific taxation advice is sought for all matters covered by this publication.

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