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Streamlined Voluntary Disclosure

The IRS now accepts that taxpayers should not be exposed to extremely harsh penalties for a non-wilful failure to comply with all the various tax reporting requirements. With this in mind, the IRS now offers a Streamlined Voluntary Disclosure program for taxpayers who can 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 program is applied differently for US Persons that can qualify under the offshore version of the program, and those that must use the US resident program.

Foreign Offshore Procedure

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.

Are you eligible?

To be eligible for the Offshore Procedure the taxpayer must meet a non-residency requirement. This requirement 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.

File the returns, pay the tax

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:

  • File 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

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 the taxpayer:

  • 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 requires 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 (5% of relevant foreign assets)
  • Pay the full amount of the tax, interest, and the Title 26 penalty along with the amended tax returns

Delinquent FBARS

Taxpayers who do not need to use either the Updated Voluntary Disclosure process or the Streamlined Filing Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax, but who:

  • Have not filed a required Report of Foreign Bank and Financial Accounts (FBAR) (FinCEN Form 114, previously Form TD F 90-22.1)
  • Are not under a civil examination or a criminal investigation by the IRS
  • Have not already been contacted by the IRS about the delinquent FBARs
    should file the delinquent FBARs according to the following:
  • Review the instructions
  • Include a statement explaining why you are filing the FBARs late
  • File all FBARs electronically at FinCEN
  • On the cover page of the electronic form, select a reason for filing late
  • If you are unable to file electronically, contact FinCEN’s Regulatory Help line at 1-800-949-2732 or 1-703-905-3975 (if calling from outside the United States) to determine possible alternatives to electronic filing.

Coming forward has its benefits

The IRS will not impose a penalty for the failure to file the delinquent FBARs if you properly reported on your U.S. tax returns, and paid all tax on, the income from the foreign financial accounts reported on the delinquent FBARs, and you have not previously been contacted regarding an income tax examination or a request for delinquent returns for the years for which the delinquent FBARs are submitted.
FBARs will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

Delinquent Informational Returns

Taxpayers who do not need to file delinquent or amended tax returns to report and pay additional tax, but who:

  • Have not filed one or more required international information returns
  • Have reasonable cause for not timely filing the information returns
  • Are not under a civil examination or a criminal investigation by the IRS
  • Have not already been contacted by the IRS about the delinquent information returns
    should file the delinquent information returns with a statement of all facts establishing reasonable cause for the failure to file.

Reasonable causes?

As part of the reasonable cause statement, taxpayers must also certify that any entity for which the information returns are being filed was not engaged in tax evasion. If a reasonable cause statement is not attached to each delinquent information return filed, penalties may be assessed in accordance with existing procedures.

  • All delinquent international information returns other than Forms 3520 and 3520-A should be attached to an amended return and filed according to the applicable instructions for the amended return
  • All delinquent Forms 3520 and 3520-A should be filed according to the applicable instructions for those forms
  • A reasonable cause statement must be attached to each delinquent information return filed for which reasonable cause is being requested

Information returns filed with amended returns will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.

We have a long history of success

US Tax & Financial Services has been assisting clients for 30 years in bringing their tax filings up-to-date and in compliance with the law. We have completed many successful cases of Voluntary Disclosure for clients and are aware of all changes that occur to these IRS programs.

We have a broad range of experience as a result of the wide variety of situations we see on a daily basis, including the cases of ‘accidental’ Americans. We have been a leading international firm in this area and our experience in doing these disclosures is exceptional.

Please call or email us for a confidential consultation about your options.

Did you Know?

  • Fact Seven

    Thanks to FATCA banks must disclose their American account holders to the IRS or local tax authority.
  • Fact Six

    The IRS is actively looking for non compliant US persons.
  • Fact Five

    It takes an average of 16 hours to do IRS Form 1040.
  • Fact Four

    There are over 500 IRS tax forms.
  • Fact Three

    Since 1916, illegal income has been taxable.
  • Fact Two

    US persons must file tax
    returns no matter where they live and work.
  • Text One

    7 million Americans abroad
    only 500,000 compliant