While more details will be forthcoming, it appears to essentially involve filing three years' delinquent US tax returns (including all required income tax information reporting forms), six years' delinquent FBARs (Form 90-22.1), plus any additional information that future instructions require. Payment of any US federal tax and interest due must accompany the submission.

"I have fielded an unprecedented number of calls from concerned US citizens living in Canada over the past year desperate for more guidance," says Halifax-based Jason Hale, chartered accountant and principal, Tax Services, Grant Thornton LLP. "While not the answer for all U.S. delinquent filers, this new procedure will be welcomed as a much more reasonable alternative for most of the hundreds of thousands who should file but have minimal U.S. tax exposure. For some, though, there remains a cloud of uncertainty and, some would say, unduly onerous foreign information reporting requirements for U.S. citizens who live outside the United States."

According to the IRS website, "For those taxpayers presenting low compliance risk, the review will be expedited and the IRS will not assess penalties or pursue follow-up actions. Submissions that present higher compliance risk are not eligible for the procedure and will be subject to a more thorough review and possibly a full examination, which in some cases may include more than three years."

The IRS will determine the level of compliance risk presented by the submission. "Low risk will be predicated on simple returns with little or no US tax due. Absent high risk factors, if the submitted returns and application show less than $1,500 in tax due in each of the years, they will be treated as low risk. In general, the risk level will rise as the income and assets of the taxpayer rise, if there are indications of sophisticated tax planning or avoidance, or if there is material economic activity in the United States."

Additional information regarding the specific factors that the IRS will use to assess the level of compliance risk is to be released prior to the effective date of the new procedure. More details regarding the application process will also be provided prior to the effective date. In addition, there will be a procedure for holders of RRSPs who have not made a timely election to defer US taxation of income within the RRSP to request permission to make a late election.

The new procedure is a welcome response to the dilemma facing many US citizens resident in Canada who are delinquent in their US tax filings, but who owe little or no US tax and whose tax affairs are relatively straightforward. However, for taxpayers who owe more substantial amounts of US tax, or whose US tax situation is more complex, the new procedure may not be the answer. The formal Overseas Voluntary Disclosure Program (OVDP) announced on January 9, 2012, for example, may be more appropriate for some individuals.