IRS Streamlined Program
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IRS Streamlined Program
IRS Streamlined Program: In 2014, the IRS developed the Streamlined Program in order to assist Taxpayers with getting into compliance for unreported foreign accounts, assets, investments, and income. For many clients, the main purpose of the submission is to file late or delinquent FBAR. The purpose of the program is to allow taxpayers to certify under penalty of perjury that they are compliant and avoid harsher penalties and other tax consequences. Eligibility for the program is limited to non-willful taxpayers who also meet other submission requirements.
Streamlined Program Filing Requirements
The main requirements to become eligible for the program, include:
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Conduct was Non-Willful
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Not currently under Civil Exam or Audit
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Pay prior assessed penalties (if applicable)
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Valid Tax Identification Number
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There are unfortunately, many attorneys who falsely represent that they specialize in this area of law, have a 100% acceptance rate, and/or that the disclosures are all easy. They may also tout experience they do not have (such as working at the IRS) but most have either no actual tax legal experience at the IRS and/or did not handle offshore disclosure while an employee for the IRS)
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Most submissions are still subject to audit
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Streamlined Program audits are on the rise
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Unless an Attorney is a Board-Certified Tax Law Specialist, there is no way to know their true tax law experience.
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As with any tax related, most disclosure are much more complicated than first meets the eye.
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What is the Goal of the IRS Streamlined Program?
The purpose of the Streamline Disclosure program is to assist Taxpayers with safely getting into offshore compliance with the Internal Revenue Service and FinCEN (Financial Crimes Enforcement Network).
The program is available to U.S. Taxpayers who reside in the U.S. or abroad.
As provided by the IRS:
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“The streamlined filing compliance procedures describe below are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.
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Who is Eligible for the Streamlined Program?
The IRS has developed various qualifying facts that will make a person eligible for the Program. Not all non-willful taxpayers can qualify for either the Streamlined Domestic Program or Streamlined Foreign Program
Conduct was Non-Willful
Non-willful is a Totality of the circumstance analysis. It is not one factor, but rather when looking at the group of factors as a whole, does the Taxpayer seems non-willful:
As provided by the IRS:
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‘Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.’
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Not currently under Civil Exam or Audit
One very important distinction about not being under exam or audit is that the Taxpayer does not need to be under audit for offshore-related activities. They can be under audit for ANY reason.
As provided by the IRS:
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“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 agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.”
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Pay prior assessed penalties (if applicable)
If a person previously submitted and was non-willful at that time, they may still qualify for the Streamlined Filing Procedures, BUT they must pay any previously issued penalties.
As provided by the IRS:
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“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.”
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Valid Tax Identification Number
In order to submit to the Streamlined Program, a person must first have a valid Tax Identification Number, such as an ITIN or SSN.
As provided by the IRS:
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“All returns submitted under the streamlined procedures must have a valid Taxpayer Identification Number. For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security Number (SSN). For individuals who are not eligible for an SSN or ITIN, your tax return will not be processed under the streamlined procedures. However, for taxpayers who are ineligible for an SSN but do not have an ITIN, a submission may be made under the streamlined procedures if accompanied by a complete ITIN application. Additional information on getting an ITIN is available. “
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Streamlined Domestic Program (SDOP)
The streamlined domestic program is used by U.S. taxpayers who do not qualify as foreign residents. Unlike the streamlined foreign program, the streamlined domestic program is for non-foreign residents.
Not everyone will qualify for the streamlined domestic program (SDOP) because it requires that the taxpayer has already filed timely original tax returns.
In addition, the taxpayer must show they were non-willful, and be able to obtain sufficient information about their foreign accounts and assets to enable them to calculate the Title 26 miscellaneous offshore 5% penalty.
Further, the taxpayer must not be under auditor examination (for any reason).
Streamlined Foreign Program (SFOP)
The streamlined foreign program is a great opportunity for foreign residents, including Expatriates and Accidental Americans.
If the taxpayer is able to qualify as a foreign residence for streamlined foreign purposes and can show they were non-willful, they may qualify for a complete penalty waiver.
In addition, the person may file original tax returns under the program — which is not currently available under the domestic version of the program.
Similar to the streamlined domestic program, the taxpayer must also not be under audit for any reason.
OVDP vs IRS Streamlined Program vs. Delinquency
IRS Streamlined Program Filing is just one type of FBAR and offshore disclosure amnesty.
The IRS has developed many programs to assist Taxpayers who are already out of compliance for non-reporting.
Some of the more common programs, include:
Just Start Filing Forward?
No, unless the current year is the first-year you had an FBAR Reporting requirement.
If you had a prior year reporting requirement, but only begin to start filing in the current year (Filing Forward) it is illegal. In the world of offshore disclosure, this is referred to as an FBAR Quiet Disclosure.
The IRS has warned taxpayers that if they get caught in a FBAR Quiet Disclosure situation, it may lead to willful penalties and even a criminal investigation by the IRS Special Agents.
Our FBAR Lawyers Represent Clients Worldwide
Our FBAR Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure and the IRS Streamlined Programs.
Contact our firm today for assistance with getting compliant.
