Streamlined Filing Compliance Procedures

Streamlined Filing Compliance Procedures

As part of the Offshore Voluntary Disclosure Program, the IRS has offered streamlined filing compliance procedures to US taxpayers living out of the country with a minimal amount of unreported tax liability since 2012. In 2014, the IRS expanded these procedures to include taxpayers residing in the United States, and eliminated the unpaid tax threshold.

The streamlined procedures are available to taxpayers who can certify that their failure to disclose foreign assets and pay the related tax was not due to willful conduct. If there is any evidence of willful behavior, it is best to contact a knowledgeable tax attorney to determine whether the taxpayer should enter the Offshore Voluntary Disclosure Program in lieu of the streamlined procedures.

There are two sets of streamlined procedures based on whether or not the taxpayer is residing in the United States.

Streamlined Procedures for Taxpayers Residing in the United States

To be eligible for the Streamlined Domestic Offshore Procedures, the individual taxpayer must:

  1. Live in the United States;
  2. Have previously filed tax returns for the last three years;
  3. Not have reported and paid tax on income generated from an undisclosed foreign account or other asset;
  4. Not have filed an FBAR, Form 8938, or other international information reporting return; AND
  5. Not have been willful in failing to meet these reporting obligations.

What Are the Specific Streamlined Domestic Offshore Procedures?

Eligible taxpayers are required to amend three years of tax returns to include previously unreported foreign income, along with any required information returns, such as Form 3520 or Form 8938. Each amended tax return must have “Streamlined Domestic Offshore” written in red at the top of the first page. Additionally, six years of FBARs must be filed with “Other” selected as the reason for filing late, and “Streamlined Filing Compliance Procedures” entered in the explanation box. A miscellaneous offshore penalty equal to 5% of the largest account balance over the six-year FBAR reporting period must also be paid, along with the tax and interest that is due with the amended returns.

The taxpayers needs to submit Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures. This Form includes the total of tax and interest that is due for each amended return, a list of all foreign financial accounts covered by the six-year FBAR period, a calculation of the 5% miscellaneous offshore penalty, an explanation with specific reasons relating to the failure to report and pay tax on foreign-sourced income, and a certification that the conduct was not willful.

All of the required paperwork and payment must be mailed to the following address:

Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Domestic Offshore
Austin, TX 78741

Streamlined Procedures for Taxpayers Residing Outside the United States

The requirements for taxpayers living out of the country are very similar to the domestic procedures; however, one major difference is the absence of the miscellaneous offshore penalty.

In addition, the three years of amended returns must have “Streamlined Foreign Offshore” written in red at the top of the first page. In lieu of Form 14654, the taxpayers must complete Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures. This Form only requires the total of the tax and interest due, an explanation with specific reasons relating to the failure to report and pay tax on foreign-sourced income, and a certification that the conduct was not willful.

All of the required paperwork and payment must be mailed to the following address:

Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741

Let Our Experienced Attorneys Get You Back on Track

Please contact NewPoint Law Group to find out if you qualify for the Streamlined Filing Compliance Procedures. For a free consultation, call us at 1-800-358-0305 or contact us online today.

LETS TALK

Tax Law
Business Law
Estate Planning
Real Estate