Streamlined Procedures for Foreign Accounts Compliance

Form 1040X, Amended U.S. Individual Income Tax Return, including information returns, as needed for the last three years. Information returns which a taxpayer may need to file include Form 8938, Statement of Foreign Financial Assets, Form 5471, Information Return of U.S. Persons With Respect To Certain Foreign Corporations, Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts, Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner, and Form 926, Return by a U.S. Transferor of Property to a Foreign Corporation. A separate series of articles examines international information returns.
Checks in payment of the taxpayer’s offshore penalty, and tax due for each year, and interest on the tax. We recommend a separate check for the taxpayer’s offshore penalty, and for the taxpayer’s tax and interest due for each of the amended income tax returns. The offshore penalty is 5% of the taxpayer’s high aggregate balance of foreign financial accounts as of the end of each of the last six calendar years. We advise having the taxpayer pay interest on each tax balance to a date which is 30 days beyond the date we make the Streamlined Procedures submission, as we do not know the date on which the IRS will receive and process the Streamlined Procedures submission. The IRS will refund any overpayment to the taxpayer. No interest is payable on the offshore penalty.
Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures. Form 14654—
reports the taxpayer’s tax and interest due for each of the last three years;
reports the taxpayer’s foreign financial account balances for each of the last six years, and the taxpayer’s offshore penalty; and
includes certification by the taxpayer that his noncompliance was not willful, and a statement of the taxpayer’s facts in support of the certification.

Form 1040X, Amended U.S. Individual Income Tax Return, including information returns, as needed for the last three years.
Checks in payment of the taxpayer’s tax due for each year, and interest on the tax.
Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures. Form 14653—
reports the taxpayer’s tax and interest due for each of the last three years;
includes boxes to checking whether the taxpayer has been physically outside of the U.S. in at least 330 days in at least one of the last three years, and
includes certification by the taxpayer that his noncompliance was not willful, and a supporting statement of the taxpayer’s facts in support of the certification.

VDP—IRS’ Updated Voluntary Disclosure Practice

Posted on: July 22, 2019

The Internal Revenue Service ended its Offshore Voluntary Disclosure Program (“OVDP”) effective September 28, 2018. Since then the IRS has made its Voluntary Disclosure Practice (“VDP”) available to willfully-noncompliant taxpayers. VDP offers such taxpayers the prospect of avoiding criminal prosecution, and of mitigating civil penalties. VDP does not apply to the great majority taxpayers whose failure to comply with U.S. laws concerning foreign financial accounts, foreign income, or foreign entities...

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Offshore Accounts Remain IRS Enforcement Priority

Posted on: May 16, 2019

At the American Bar Association Taxation Section’s annual meeting in Washington, D.C., in May, 2019, IRS representatives said the IRS continues examining evidence of Americans’ foreign financial accounts, and seeking additional such evidence. The import of this cryptic message is clear: Americans should comply with U.S. laws concerning foreign financial accounts as soon as possible, and those who fail to comply do so at their peril. The Bank Secrecy Act...

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Streamlined Procedures for Foreign Accounts Compliance

Streamlined Procedures for Foreign Accounts Compliance

Many Americans become compliant with U.S. laws concerning foreign financial accounts by means of the Streamlined Filing Compliance Procedures (the “Streamlined Procedures”).

There are two species of Streamlined Procedures submissions: those for residents of the United States, and those for nonresidents of the United States.

Streamlined Procedures for Residents of the United States

The Streamlined Procedures for Residents of the United States may be used to amend U.S. previously-filed income tax returns, but not to file tax returns which hacve not previously been filed (“delinquent” tax returns).

In a Streamlined Procedures submission for residents of the United States, the submission package consists of the following:

Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures. Form 14654—

reports the taxpayer’s tax and interest due for each of the last three years;

reports the taxpayer’s foreign financial account balances for each of the last six years, and the taxpayer’s offshore penalty; and

includes certification by the taxpayer that his noncompliance was not willful, and a statement of the taxpayer’s facts in support of the certification.

IRS acceptance of a Streamlined Procedures submission discharges the taxpayer of (1) tax for all years before the last three years, and (2) all penalties other than the offshore penalty.

Streamlined Procedures for Nonresidents of the United States

The submission package in a Streamlined Procedures submission for nonresidents of the United States consists of the following:

Form 1040X, Amended U.S. Individual Income Tax Return, including information returns, as needed for the last three years.

Checks in payment of the taxpayer’s tax due for each year, and interest on the tax.

Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures. Form 14653—

reports the taxpayer’s tax and interest due for each of the last three years;

includes boxes to checking whether the taxpayer has been physically outside of the U.S. in at least 330 days in at least one of the last three years, and

includes certification by the taxpayer that his noncompliance was not willful, and a supporting statement of the taxpayer’s facts in support of the certification.

There is no offshore penalty in a Streamlined Procedures case for nonresidents of the U.S.

IRS acceptance of a Streamlined Procedures submission discharges the taxpayer of tax for all years before the last three years, and all penalties including accuracy-related penalties, penalties for failure to timely file a tax return, and penalties for failure to timely pay tax.

Willfulness

Taxpayers Who Do Not Have Underreported Tax

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