Should the IRS modify its offshore voluntary disclosure program for U.S. citizens residing overseas? IRS is reconsidering the effectiveness of its offshore voluntary disclosure program. Should it be modified?
Should the IRS modify its offshore voluntary disclosure program for U.S. citizens residing overseas? IRS is reconsidering the effectiveness of its offshore voluntary disclosure program. Should it be modified?
According to Tax Analyst’s “The IRS is reexamining its offshore voluntary disclosure program and considering making modifications to it, according to Michael Danilack, deputy commissioner (international), IRS Large Business and International Division.”
U.S. citizens who have lived most all of their lives overseas should not be subject to the same scrutiny and inflexibility that currently exists for U.S. taxpayers residing in the U.S. Important differences exist, mostly because of the lack of U.S. citizens residing overseas to understand the complex U.S. tax law system applicable to them; in addition to the country’s tax laws and requirements in their country of residence.
The de-facto U.S. income tax residency regime is a residence based regime for several reasons. First, the National Taxpayer Advocate estimates there are between 5-7 million U.S. citizens residing overseas. Second, only a small portion of these taxpayers apparently even file U.S. income tax returns. The IRS taxpayer statistics office showed that only 334,851 U.S. taxpayers filed a foreign earned income exclusions (for the year 2006, which is the latest year available from the IRS office of tax statistics). How many of these taxpayers are not even U.S. citizens? The details of U.S. tax returns filed with foreign earned income exclusions can be read here.
Each country’s filings are set out below (notice only 6,112 returns were filed from Mexico, where the largest number of U.S. citizens reside in any particular country; with Canada as the second most populated with U.S. citizens):
| All geographic areas | 334,851 |
| North America, total | 36,179 |
| Canada | 30,067 |
| Greenland | 0 |
| Mexico | 6,112 |
| Latin/South America, total | 13,911 |
| Argentina | 751 |
| Brazil | 2,696 |
| Chile | 902 |
| Colombia | 1,870 |
| Costa Rica | 1,662 |
| Panama | 1,032 |
| Peru | 419 |
| Venezuela | 705 |
| Other Latin and South American countries | 3,876 |
| Caribbean, total | 7,323 |
| Bahamas | 1,089 |
| Bermuda | 1,758 |
| Cayman Islands | 970 |
| Dominican Republic | 1,093 |
| Other Caribbean countries | 2,414 |
| Europe, total | 99,732 |
| Austria | 1,361 |
| Belgium | 1,881 |
| Czech Republic | 1,091 |
| Denmark | 1,754 |
| Finland | 354 |
| France | 9,653 |
| Germany | 21,513 |
| Greece | 1,484 |
| Hungary | 604 |
| Ireland | 1,896 |
| Italy | 5,199 |
| Luxembourg | 219 |
| Netherlands | 3,263 |
| Norway | 1,215 |
| Poland | 735 |
| Portugal | 387 |
| Russia | 2,495 |
| Spain | 2,453 |
| Sweden | 1,399 |
| Switzerland | 7,093 |
| Turkey | 1,199 |
| United Kingdom | 28,409 |
| Other European countries | 4,078 |
| Africa, total | 9,697 |
| Algeria | * 241 |
| Angola | 398 |
| Egypt | 1,658 |
| Kenya | 992 |
| Nigeria | 906 |
| South Africa | 923 |
| Other African countries | 4,576 |
| Asia, total | 138,795 |
| Afghanistan | 5,912 |
| China | 12,430 |
| Hong Kong | 10,792 |
| India | 4,214 |
| Indonesia | 1,786 |
| Iraq | 18,325 |
| Israel | 8,986 |
| Japan | 23,529 |
| Malaysia | 1,160 |
| Philippines | 2,313 |
| Saudi Arabia | 5,109 |
| Singapore | 3,636 |
| South Korea | 6,668 |
| Taiwan | 6,588 |
| Thailand | 3,643 |
| United Arab Emirates | 7,423 |
| Other Asian countries | 16,284 |
| Oceania, total | 9,724 |
| Australia | 6,420 |
| New Zealand | 2,518 |
| Other Oceania countries | 787 |
| All other countries | 19,490 |
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