What do you need to know about the IRS updated Streamlined Filing Compliance Procedures or “Streamlined Procedures?” Are you concerned about unreported or under-reported offshore income or assets? Are there accounts you have inadvertently left off of a recent FBAR? Have you failed to file an FBAR when you otherwise should have? Were your oversights inadvertent or, more importantly, “non-willful?”
There are two primary vehicles to come into compliance with unreported or under-reported offshore income and assets: The Voluntary Disclosure Program (VDP) or the Streamlined Filing Compliance Procedures. The Streamlined Procedures can be a much less expensive and onerous option for a US Taxpayer to consider.
The IRS updated Streamlined Filing Compliance Procedures (both the Domestic Offshore and the Foreign Offshore Procedures) provide the opportunity for a US taxpayer to come into compliance with current or updated informational reports such as the FinCEN Form 114 or Report of Foreign Bank and Financial Accounts (more commonly referred to as FBAR) and IRS tax returns. The taxpayer may file up to 3 years of returns under the Streamlined Procedures but must provide original or amended informational filings for the past six years, including (if applicable) IRS Forms 8938, 3520 and 3520-A, 5471, and 8864.
In most cases, the choice between the IRS updated Streamlined Filing Compliance Procedures and the Voluntary Disclosure Program will be determined by the “intent” behind the actions of the US taxpayer. Was the conduct of the taxpayer generally considered to be “non-willful?”
Non-willful conduct may be generally considered unintentional and includes the failure to disclose fully or accurately all required offshore income, investments, assets, and Foreign Financial Accounts (FFIs). The behavior of the non-willful US taxpayer may include terms such as inadvertent or inaccurate reporting or omissions, as well as a misperception or misunderstanding of the taxpayer’s responsibilities under US tax laws.
There is presently no clear-cut test or standard to determine the intent or willfulness of a US taxpayer. However, your tax attorney should provide clear insight based upon your unique and specific circumstances. In order to qualify for the IRS updated Streamlined Filing Compliance Procedures, the actions of the US taxpayer must be “non-willful,” and the taxpayer cannot presently be under investigation by the agency or the subject of an IRS audit.
The Streamlined Procedures provide a substantial waiver of the penalties that would generally apply to those who fail to file the FinCEN Form 114 (FBAR) and/or tax returns as well as penalties for late filing and inaccuracies in reported income.
It is important to note that participation in the Streamlined Procedures program does not preclude the US taxpayer from being selected for an IRS audit. The choice of filing under the Streamlined Procedures neither increases the likelihood of an audit nor does it release the taxpayer from the risk of an audit. However, the IRS tends to favorably view those who have come into voluntary compliance through a program such as the IRS updated Streamlined Filing Compliance Procedures.
We invite you to learn more about the integrated tax, legal, accounting and business consulting services of Allen Barron and contact us or call today to schedule a free consultation at 866-631-3470.
