- Individual Tax
- US Tax Overview
- UK Tax Overview
Streamlined Voluntary Disclosure
The Streamlined Voluntary Disclosure procedures were introduced by the IRS on June 26th 2012 for non-resident US taxpayers. The procedure recognised that some US taxpayers living outside of the United States had failed to file their US tax returns or Foreign Bank and Financial Accounts (FBARs), but had recently become aware of these obligations and wished to become compliant, in order to avoid penalties and criminal prosecution.
The 2012 procedure accommodated non-residents and dual citizens, but in June 2014 the procedure was extended to taxpayers living in the US.
Streamline Procedures for Taxpayers Outside the US
Following the 2014 changes, the taxpayer is obliged to certify that their failure to file all information, report all income and pay tax was due to ‘non-wilful conduct’ – that is, due to negligence, inadvertence and mistake or good faith misunderstanding of these legal obligations.
The taxpayer is now also obliged to meet a non-residency requirement, which is met if in any one or more of the most recent three years for which the US tax return due date, or properly applied for extended due date, has passed (the ‘covered tax period’), the individual did not have a US abode and was physically outside the United States for at least 330 full days.
Additionally, the original $1,500 maximum US tax liability requirements and all risk assessment criteria have now been eliminated.
New Foreign Offshore Procedure
In order to extend the reach of the voluntary disclosure program, the IRS now accepts that taxpayers should not be exposed to extremely harsh penalties for a non-willful failure to comply with all the various tax reporting requirements. Eligible taxpayers who comply with the procedures will not receive failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties or FBAR penalties unless, following audit, the original noncompliance is deemed wilful.
For each of the most recent 3 years for which the US tax return due date (or properly applied for extended due date) has passed, the new procedure requires that the taxpayer:
Files delinquent or amended tax returns, together with all required information returns
File any delinquent FBARs (for each of the most recent 6 years for which the FBAR due date has passed)
Pay the full amount of tax and interest due with the delinquent or amended returns
Streamline Procedures for Taxpayers Living Inside the US
Taxpayers living inside the US will now qualify under the new domestic procedure if they have previously filed a US tax return for each of the most recent three years for which the US tax return due date (or properly applied for extended due date) has passed, and – through non-wilful conduct:
Failed to report gross income from a foreign financial asset and pay tax
Failed to file an FBAR relating to the foreign financial asset
The Domestic Offshore Procedure obliges the taxpayer to:
File amended tax returns, together with all required information returns for the covered tax period
File any delinquent FBARs for the covered FBAR period
Pay a Title 26 miscellaneous offshore penalty
Pay the full amount of the tax, interest, and the Title 26 penalty along with the amended tax returns
Understanding the Differences
In simple terms, the Domestic Offshore procedure requires that the taxpayer has filed a tax return during the prior three year period, while the Foreign Offshore procedure does not. Unlike the Foreign Offshore penalty, a 5% penalty is imposed on the taxpayer in the Domestic Offshore procedure.
We are fully informed of all IRS changes and have completed many successful cases of Streamlined Voluntary Disclosure for clients, both inside and outside of the US. Please call or email us for a confidential consultation to discuss your US tax requirements.
Did you Know?
Fact SevenThanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
Fact SixThe IRS is actively looking for non compliant US persons.
Fact FiveIt takes an average of 16 hours to do IRS Form 1040.
Fact FourThere are over 500 IRS tax forms.
Fact ThreeSince 1916, illegal income has been taxable.
Fact TwoUS persons must file tax returns no matter where they live and work.
Text One7 million Americans abroad
only 500,000 compliant