Streamlined Filing
Compliance Procedure
Compliance Procedure
1. What
Non-OVDI procedure to disclose prior failures
while being subject only to a 5% penalty if
failure was nonwillful
while being subject only to a 5% penalty if
failure was nonwillful
2. General Requirements
Only for individuals and estates
No pending civil audit and not under criminal investigation
Valid TIN for all returns filed needed
Not participating in ODVP, except that taxpayers
who have submitted a voluntary disclosure letter
under the OVDP or predecessor voluntary
disclosure program and that do not receive a
closing agreement that was signed by before
July 1, 2014, can use special transitional rules
to both remain in the OVDP program but be
subject to the lower 5% penalty.
who have submitted a voluntary disclosure letter
under the OVDP or predecessor voluntary
disclosure program and that do not receive a
closing agreement that was signed by before
July 1, 2014, can use special transitional rules
to both remain in the OVDP program but be
subject to the lower 5% penalty.
Note, however, that transitional entry into
the streamlined penalty is based on an IRS determination
of eligibility which is not subject to review. Participants
are still subject to other late payment and accuracy
related penalties which do not apply to other streamlined
program participants but that do apply to OVDI participants.
the streamlined penalty is based on an IRS determination
of eligibility which is not subject to review. Participants
are still subject to other late payment and accuracy
related penalties which do not apply to other streamlined
program participants but that do apply to OVDI participants.
3. Domestic program for
U.S. persons resident in the U.S.
U.S. persons resident in the U.S.
Requirements
failed to meet non-residency requirements, and
filed a U.S. income tax return (if required)
for each of the most recent 3 years, and
for each of the most recent 3 years, and
failed to report gross income from a
foreign financial asset and pay tax,
and may have failed to file FBAR or
other info forms (3520, 3520-A, 5471,
5472, 8938, 926, 8621), and
foreign financial asset and pay tax,
and may have failed to file FBAR or
other info forms (3520, 3520-A, 5471,
5472, 8938, 926, 8621), and
such failures result from non-willful conduct
(conduct that is due to negligence, inadvertence,
or mistake or conduct that is the result of a
good faith misunderstanding of the requirements of law)
(conduct that is due to negligence, inadvertence,
or mistake or conduct that is the result of a
good faith misunderstanding of the requirements of law)
Procedures
file 3 years amended returns and all required information returns
cannot use these procedures to file delinquent returns
include required legend in red on top of filings
attach to each return the Certification described below
file 6 years of delinquent FBARs
filed electronically - follow procedures in
Domestic program requirements on IRS
set to flag filings as being made under
the streamlined program
Domestic program requirements on IRS
set to flag filings as being made under
the streamlined program
pay Title 26 miscellaneous offshore penalty,
full tax due, and interest, with the above returns
full tax due, and interest, with the above returns
complete and sign Certification by U.S.
Person Residing in the U.S. statement certifying:
Person Residing in the U.S. statement certifying:
eligibility
all FBARS now been filed
failure to report income, pay all tax, and submit all
required information returns, resulted from non-willful conduct
required information returns, resulted from non-willful conduct
the penalty is accurate
submit to designated Austin, TX address
maintain foreign financial asset information supporting
the computation and submit it upon request
the computation and submit it upon request
Title 26 miscellaneous offshore penalty
5% of the highest aggregate balance/value
of the taxpayer's foreign financial assets
that are subject tot he penalty during the
years in the covered tax return and covered FBAR periods
of the taxpayer's foreign financial assets
that are subject tot he penalty during the
years in the covered tax return and covered FBAR periods
4. U.S. persons who do not reside
in the U.S. follow a separate set of
requirements and procedures
in the U.S. follow a separate set of
requirements and procedures
5. Key Advantages
5% penalty for U.S. residents and 0% penalty for nonresidents
As compared to 27.5% (or possible 50%) penalty under OVDI
No mandated IRS review or audit
Shorter covered periods than OVDI
No accuracy related penalties, and
no lack of filing penalties, unless
(a) original return was fraudulent and/or
(b) FBAR violation was willful.
no lack of filing penalties, unless
(a) original return was fraudulent and/or
(b) FBAR violation was willful.
But no abatement of previously assessed penalties.
Treaty deferral elections available.
Less documentary submissions than under OVDI
6. Key Disadvantages
Uncertain definition of wilfulness. If
audited and wilfull failure to file found,
lower OVDI penalty will not be available
and regular noncompliance penalties may apply
audited and wilfull failure to file found,
lower OVDI penalty will not be available
and regular noncompliance penalties may apply
No protection from criminal liability
May still be subject to audit
7. Misc.
Can use, even if made a quiet disclosure,
but any penalties previously applied will not be abated
but any penalties previously applied will not be abated
IRS processing of returns like any other filed
returns. No special acknowledgment by the IRS
and no closing agreement
returns. No special acknowledgment by the IRS
and no closing agreement
Possible audit like any other filing
May not later participate in OVDP
No stated expiration date for this procedure
Consider seeking pre-clearance from the IRS
to confirm taxpayer is not a target of an unknown
criminal investigation (which would disqualify
the taxpayer from the streamlined program)
to confirm taxpayer is not a target of an unknown
criminal investigation (which would disqualify
the taxpayer from the streamlined program)
Consider seeking noncriminal prosecution assurance
under traditional Internal Revenue Manual disclosure procedures
under traditional Internal Revenue Manual disclosure procedures
Author Information
Charles (Chuck) Rubin
crubin@floridatax.com - 561-998-7847
http://rubinontax.blogspot.com