Streamlined Filing Compliance

Streamlined Filing Compliance Procedures

In 2012, the Internal Revenue Service first introduced Streamline Filing Compliance Procedures for taxpayers residing overseas to help them come into compliance with their U.S. tax obligation. In 2014, the IRS announced major changes in its then Streamlined programs by allowing both taxpayers residing in the U.S. or outside of the U.S. to apply. The changes to the offshore programs help ease the compliance burden on the taxpayers and help more taxpayers come into compliance.

The streamlined procedures are available to taxpayers who can certify that their failure to report their under-reported income and offshore financial assets is from their not willful actions. The streamlined procedures are designed to provide to taxpayers:

• to file amended or delinquent returns, and
• to solve their tax and penalty procedure for filing amended or delinquent returns, and
• to resolve their tax and penalty obligations.

The streamlined filing compliance procedures are designed only for individual taxpayers, including estates of individual taxpayers. The streamlined procedures are available to both U.S. individual taxpayers residing outside the United States and U.S. individual taxpayers residing in the United States. Descriptions of the specific eligibility requirements for the streamlined procedures for both non-U.S. residents (the “Streamlined Foreign Offshore Procedures”) and U.S. residents (“Streamlined Domestic Offshore Procedures”) are set forth below.

• Taxpayers must certify that conduct was not willful. Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, will be required to certify, in accordance with the specific instructions set forth below, that the failure to report all income, pay all tax and submit all required information returns, including FBARs (Foreign Bank Account Reports) was due to non-willful conduct. Please consult us if you have any questions regarding this certification.
• IRS has initiated a civil examination of taxpayer’s returns for any taxable year. If the IRS has initiated a civil examination of taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Taxpayers under examination may consult with their IRS agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures. We have experience dealing with the IRS audit on streamlined cases. Please consult us if you have any questions.
• Taxpayers eligible to use streamlined procedures who have previously filed delinquent or amended returns must pay previous penalty assessments. Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the Offshore Voluntary Disclosure Program (OVDP) or its predecessor programs) may still use the streamlined procedures by following the instructions set forth below. However, any penalty assessments previously made with respect to those filing will not be abated.

Taxpayers who want to participate in the streamlined procedures need a valid Taxpayer Identification Number. All returns submitted under the streamlined procedures must have a valid Taxpayer Identification Number.

The tax returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be processed like any other return submitted to the IRS. Consequently, receipt of the returns will not be acknowledged by the IRS and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS. Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and who therefore seek assurances that they will not be subject to criminal liability and/or substantial monetary penalties should consider participating in the Offshore Voluntary Disclosure Program and should consult with their tax professional or legal advisers.

Please note that once a taxpayer makes a submission under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, the taxpayer may not participate in OVDP. Hence it is very important to talk to a tax professional or legal adviser to review your individual case and select the most appropriate submission procedure. We have extensive experience in reviewing the streamlined or OVDP cases. Please contact us for a free initial discussion.