U.S. Citizens and Green-Card Holders Abroad: The IRS Non-Filer Program Explained
On this page:
- What is U.S. citizenship-based taxation, and who does it reach?
- Why does the IRS focus so heavily on accounts and assets outside the U.S.?
- What are the “New Filing Compliance Procedures for Non-Resident U.S. Taxpayers”?
- What is the IRS non-filer program?
- What can happen if someone living abroad never files a U.S. return?
- Where is the non-filer program actually written down?
What is U.S. citizenship-based taxation, and who does it reach?
The U.S. taxes based on citizenship, not just on where a person lives. A U.S. citizen who has spent nearly all of their life outside the U.S. can still fall within the U.S. tax system. Lawful permanent residents (green-card holders, also called LPRs) residing outside the U.S. can be reached as well. Many people in both groups are shocked to learn how broad this scope is.
Why does the IRS focus so heavily on accounts and assets outside the U.S.?
In recent years the IRS and the Tax Division of the Department of Justice (DOJ) have aggressively pursued assets and accounts located outside the U.S. That pursuit has put a keen focus on the offshore holdings of U.S. citizens and green-card holders who live abroad.
What are the “New Filing Compliance Procedures for Non-Resident U.S. Taxpayers”?
In August the IRS articulated its position for U.S. citizens and lawful permanent residents residing outside the U.S. in a document titled “New Filing Compliance Procedures for Non-Resident U.S. Taxpayers.” It sets out how the IRS approaches the filing obligations of those taxpayers.
What is the IRS non-filer program?
The IRS has had, for years, a specific program aimed at “non-filers,” meaning persons who do not file U.S. income tax returns. The program is detailed in the Internal Revenue Manual (IRM), the IRS’s internal handbook of procedures. It can apply to U.S. citizens and green-card holders living overseas who have not filed.
What can happen if a U.S. citizen or green-card holder living abroad never files a U.S. return?
When a taxpayer does not file, the IRS may prepare a “substitute return” on that person’s behalf. A substitute return is a return the IRS files for the taxpayer, rather than one the taxpayer files. This can apply to U.S. citizens and lawful permanent residents residing overseas who are non-filers. Anyone facing this situation may want to consult an experienced attorney.
Where is the non-filer program actually written down?
The non-filer program is laid out in the Internal Revenue Manual at section 4.19.17, the Non-Filer Program. Its subsections cover the full process:
- 4.19.17.1 — Non-Filer Program
- 4.19.17.2 — Non-Filer Strategy
- 4.19.17.3 — Non-Filer Processing
- 4.19.17.4 — Non-Filer Penalties
- 4.19.17.5 — Undelivered Mail
- 4.19.17.6 — Taxpayer Replies
- 4.19.17.7 — Closures, Non-Examined