On June 18, 2014, the IRS announced four new offshore compliance procedures aimed at helping taxpayers who have inadvertently omitted income from their tax returns or inadvertently not filed certain international information returns, such as a foreign bank account report, known as an FBAR. The four programs, which became effective on July 1, 2014, are: (1) the Streamlined Foreign Offshore Procedures (“SFOP”); (2) the Streamlined Domestic Offshore Procedures (“SDOP”); (3) the Delinquent FBAR Submission Procedures; and (4) the Delinquent International Information Return Submission Procedures. These programs replaced an earlier program announced in 2012, which was only available to non-resident, non-filing U.S. taxpayers, and are designed to accommodate a wider group of U.S. taxpayers. The primary consideration for a taxpayer hoping to participate in either the SFOP or the SDOP is that the taxpayer must certify that his or her conduct was not willful. This means that the taxpayer did not act intentionally or deliberately in the failure to disclose her or her offshore income or foreign accounts to the IRS or to Treasury. In addition to certifying that a taxpayer’s conduct is not willful, any taxpayer who wants to participate in the either the SFOP or the SDOP must have a valid Taxpayer Identification Number (TIN), which is either a Social Security Number (SSN) or an Individual Taxpayer Identification Number (ITIN). SFOP A taxpayer who wants to participate in the SFOP must meet the non-residency requirement. Under this criteria, a U.S. citizen or a Green Card Holder must have lived outside the United States in one of the last three tax years for at least 330 days. If the taxpayer is not a U.S. citizen or a Green Card Holder, then he/she will meet the non-residency requirement if, in any one or more of the last three years, the individual did not meet the substantial presence test. A taxpayer who participates in the SFOP will have to amend three years of tax returns (or file original tax returns) and file six years of original or amended FBARs. All penalties for failure to file or failure to pay will be waived. SDOP A taxpayer who does not meet the non-residency requirement can still participate in the Streamlined Offshore Compliance Procedures under the SDOP. Under this program, the requirements are essentially the same as in the SFOP, except that the taxpayer will incur a 5% penalty on his/her undeclared foreign financial assets. This penalty is calculated by using the year-end value of all of the taxpayer’s undeclared foreign financial assets over a six year look-back period and assessing the 5% penalty on the year in which the taxpayer’s assets are the highest. The taxpayer also must have previously filed his or her U.S. tax return (if required) for the past three years. Delinquent FBAR Submission Procedures The Delinquent FBAR Submission Procedures is for the taxpayer who does not need to use the 2014 OVDP or the Streamlined Offshore Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax. This program if for the taxpayer who has not filed an FBAR and has not already been contacted by the IRS about the delinquent FBAR. Under this program, the IRS will not impose a penalty for the failure to file the delinquent FBARs if the taxpayer has properly report on his/her income tax returns any income from the foreign financial accounts listed on the FBARs. Delinquent International Information Return Submission Procedures The Delinquent International Information Submission Procedures is for the taxpayer who does not need to use the 2014 OVDP or the Streamlined Offshore Compliance Procedures to file delinquent or amended tax returns to report and pay additional tax. This program is for the taxpayer who has not filed one or more international information returns, has reasonable cause for not filing the return or returns, and has not already been contacted by the IRS about the delinquent information return or returns. The Law Office of Deborah J. Jacobs has been involved in hundreds of cases under the Streamlined Offshore Compliance Procedures since they were announced in 2014, and also has handled numerous cases under the prior 2012 Streamlined Program for non-resident, non-filing U.S. taxpayers. If you have failed to disclose some of your offshore income or assets and/or failed to report your offshore accounts on an FBAR, or have failed to file an international information return, we can help you make an informed decision about which program you can enter. We also can assist you every step of the way. We look forward to working with you to resolve your international tax matters. |