The Federal tax return filing thresholds were updated for the 2018 tax year, with the most significant change being for individuals filing as “Married Filing Separately.” The income tax return filing threshold was reduced from $4,050 in 2017 to just $5 for 2018. However, Publication 54 – Tax Guide for U.S. Citizens and Resident Aliens Abroad, for the 2018 tax year, incorrectly stated that married taxpayers filing separately must file a return only if the individual filer’s gross income equals or exceeds $12,000.

Meanwhile, the IRS website and the 2018 instructions for Form 1040 correctly indicated that a married filing separately taxpayer must file a tax return if the individual’s gross income is at least $5. They failed to mention the change in the more detailed Publication 54 on which many US taxpayers living abroad rely.

Based on estimates provided by the IRS, there are approximately 9 million US taxpayers living abroad.* It is therefore likely that by relying on the erroneous information in Publication 54 has resulted in some taxpayers failing to have filed their 2018 tax return, especially as the IRS took seven months to update Publication 54 and correct the error.

To date, the IRS has not issued a public press release or provided an automatic penalty relief to affected taxpayers such as the “failure to file” penalty. If you are one of the taxpayers affected by this error and would like to discuss the options available to you please contact us.

References:
*https://web.archive.org/web/20180216202904/https:/travel.state.gov/content/dam/travel/CA_By_the_Numbers.pdf
https://taxpayeradvocate.irs.gov/news/NTA_Blog_PubError_Married?category=Tax%20News
https://www.irs.gov/forms-pubs/correction-of-errors-on-page-3-of-the-2018-publication-54