U.S. Taxpayers Residing Outside the United States
Streamlined Foreign Offshore Procedures
If you have foreign accounts, income or assets that have previously not been reported to the IRS, streamlined filing compliance procedures are available to you as a U.S. taxpayer, as long as you're willing to certify that your failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on your part. 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. The streamlined filing compliance procedures are designed for only individual taxpayers, including estates of individual taxpayers, and are available to both U.S. individual taxpayers residing outside the U.S. and U.S. individual taxpayers residing in the U.S. Specific eligibility requirements for the streamlined procedures apply to each.
The streamlined procedures are designed to provide (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving any outstanding tax and penalty obligations individual taxpayers, including estates of individual taxpayers, might be liable for. Under certain conditions the procedures remain available if you previously filed delinquent or amended returns in a attempt to address U.S. tax and information reporting obligations. However, any penalty assessments previously made with respect to those filing must still be paid.
Taxpayers currently under civil examination, regardless of whether the examination relates to undisclosed foreign accounts or undisclosed foreign entities, are not eligible to use the streamlined compliance procedures. If you are under examination, you or this firm should consult with the IRS agent assigned to your case. Taxpayers under criminal investigation by IRS Criminal Investigation are also ineligible.
If you are eligible to use the streamlined procedures, you must file delinquent or amended tax returns for each of the most recent 3 years for which the U.S. tax return due date (or properly applied-for extended due date) has passed, together with all required information returns (e.g., Forms 3520, 5471, and 8938). Also, you must file any delinquent Report of Foreign Bank and Financial Accounts- FinCEN Form 114 (FBAR) for each of the most recent 6 years for which the FBAR due date has passed, and pay a Title 26 miscellaneous offshore penalty. The offshore penalty is generally equal to 5% of the highest aggregate value of your foreign financial assets during the years in the covered tax return period. The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.
If you are eligible to use the streamlined procedures, you will not be subject to accuracy-related penalties, information return penalties, or FBAR penalties.
If you are concerned that your failure to report income, pay tax, and submit required information returns was due to willful conduct and you seek assurance that you will not be subject to criminal liability and/or substantial monetary penalties, you should consider participating in the Offshore Voluntary Disclosure Program (OVDP) instead.
Once you make a submission under the streamlined procedures, you may not participate in OVDP. Similarly, a taxpayer who submits to an OVDP voluntary disclosure letter is not eligible to participate in the streamlined procedures.
IRS will process returns filed under the streamlined procedures just like any other return it receives. IRS won't acknowledge receipt of the returns, nor will it automatically subject them to be audited. The returns may, however, be selected for audit under the existing audit selection processes applicable to any U. S. tax return. IRS may subject the returns to verification procedures by checking the accuracy and completeness of submissions against information received from banks, financial advisors, and other sources.
After you complete the streamlined procedures, you will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures.