IRS Delays User Fee Charges for Form 8802

October 10, 2006

Notice 2006-90 announces that the new user fee will be charged for all Forms 8802, Application for United States Residency Certification, received with a postmark date on or after November 1, 2006.

Form 8802 is used to request Form 6166, a letter that the applicant may use as proof of the applicant’s tax status as a resident of the United States. Generally speaking, the purpose of applying for Form 8802 and subsequent Form 6166 is to avoid double taxation.

When a taxpayer (a U.S. citizen or resident alien) reports and pays tax on his/her worldwide income, regardless of where he/she resides and whether or not he/she pays taxes as a resident of a foreign country, he/she may be entitled to treaty benefits, which may reduce or eliminate foreign taxes paid with respect to income derived from a treaty country such as Switzerland, U.K., etc. Here, Form 8802/Form 6166 is used to claim benefits under an income tax treaty. Besides, a taxpayer can also use Form 8802/Form 6166 to obtain an exemption from a value-added tax (VAT) imposed by a foreign country. Only certain matters in relation to his/her U.S. federal income tax status can be certified.

In the meantime, a taxpayer may not claim a foreign tax credit with respect to foreign taxes that have been reduced or eliminated by reason of a treaty or an exemption. And the foreign tax credit previously claimed should be adjusted by filing an amended return with IRS.

An applicant should file Form 8802 at least 30 days before that date he/she needs the certification of U.S. residency. However, the IRS cannot accept an early submission for a current year certification that has a postmark date before December 1.

Revenue Procedure 2006-35, 2006-37 I.R.B. 452, issued on September 11, 2006, provides that IRS will begin charging new user fee charges for processing Form 8802, and the effective date will be October 2, 2006. Notice 2006-90 now postpones the effective date to November 1, 2006.

The news release is available on IRS website: http://www.irs.gov/newsroom/article/0,,id=161559,00.html, and the instruction of Form 8802 on: http://www.irs.gov/instructions/i8802/ch01.html.