Bloomberg BNA Tax Management International Journal: A US Tax Primer on Dual Status Individuals

With the recent increase in international enforcement activities by the US Internal Revenue Service over the past few years and the commencement of the delayed US Foreign Account Tax Compliance Act (FATCA) reporting and withholding requirements that collectively target foreign assets and income of US taxpayers, dual US/non-US individuals have been forced to address their US tax compliance obligations. In many cases, such persons may have had limited or even no contact with the United States for a number of years and have considered themselves exclusively taxpayers and residents of their “home country.” Their US tax compliance responsibilities were largely ignored. Many are now dealing with those obligations for the first time and in many cases are paying a substantial “cost” for their past non-compliance.

This article is intended as a guide for “dual status” individuals as to their US tax obligations. Several special US tax law provisions that apply to such persons are identified. The alternatives currently available to such persons to resolve their past non-compliance are summarized. Finally, the options available to such persons to comply with or eliminate their US tax compliance obligations are presented.