The tax attorneys at Nardone Law Group in Columbus, Ohio are committed to keeping taxpayers updated and informed about the various programs the Internal Revenue Service offers that allow taxpayers to disclose offshore accounts and resolve any tax and penalty obligations. In our prior article on the IRS’ Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Program, we provided a brief overview of the significant changes and expansions to those programs, which accommodate a broader group of U.S. taxpayers. As part of those expansions, the Streamlined Filing Compliance Program is now available to both non-U.S. residents and U.S. residents. There are specific requirements that pertain to both groups of taxpayers. This article is intended to provide a summary of the Streamlined Filing Compliance Procedures and the general eligibility requirements that apply to both non-U.S. residents and U.S. residents. In upcoming articles, we will provide a more detailed look at the requirements for residents and non-residents.
General Eligibility Criteria
The Streamlined Filing Compliance Procedures are designed to provide U.S. taxpayers: (1) a streamlined procedure for filing an amended or delinquent tax return, and (2) terms for resolving the taxpayer’s tax liability and any subsequent penalties. The following are a few general eligibility criteria for use of the streamlined filing procedures.
1. Individuals Only – The Streamlined Filing Compliance Procedures are designed for only individual taxpayers, including estates of individual taxpayers.
2. U.S. Residents or Non-Residents – As part of the recent expansion, the streamlined filing procedures are now available to both non-U.S. residents (the “Streamlined Foreign Offshore Procedures”) and U.S. residents (the “Streamlined Domestic Offshore Procedures”).
3. Non-Willful Conduct - When utilizing the streamlined filing procedures, the taxpayer must certify that their failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. The IRS defines non-willful conduct as 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.
NLG Comment: It is important to understand that this certification must be carefully reviewed and thoroughly understood before making such certification. Intentionally falsifying this certification or negligently failing to conduct the necessary due diligence to determine whether a particular taxpayer qualifies, may place that particular taxpayer in significant harm. As an example, and discussed below, if the taxpayer ultimately does not qualify for the Streamlined Filing Compliance Program, the taxpayer will not be eligible for the Offshore Voluntary Disclosure Program. In addition, if the Internal Revenue Service determines that the taxpayer intentionally falsified the certification, the taxpayer may be prosecuted.
4. Taxpayer Identification Number – All tax returns submitted under the streamlined procedures must have a valid Taxpayer Identification Number. For U.S. citizens and resident aliens, as an example, the proper Taxpayer Identification Number is a valid Social Security Number. For individuals who are not eligible for a Social Security Number, an Individual Taxpayer Identification Number is a valid Taxpayer Identification Number. Tax returns submitted without a valid Taxpayer Identification Number will not be processed under the streamlined procedures.
5. IRS Examination Voids Eligibility – If, prior to the taxpayer’s disclosure under the Streamlined Filing Compliance Procedures, the IRS has initiated a civil examination or criminal investigation of a taxpayer’s returns for any taxable year, the taxpayer will not be eligible to use the streamlined procedures, regardless of whether the examination relates to undisclosed foreign financial assets
6. Coordination with the Offshore Voluntary Disclosure Program – Once a taxpayer makes a submission under the Streamlined Filing Compliance Procedures, the taxpayer may not participate in the Offshore Voluntary Disclosure Program. Similarly, a taxpayer who submits an Offshore Voluntary Disclosure Program voluntary disclosure letter on or after July 1, 2014, is not eligible to participate in the streamlined process.
However, a taxpayer eligible for treatment under the streamlined procedures who submits, or has submitted, a voluntary disclosure letter under the Offshore Voluntary Disclosure Program prior to July 1, 2014, but does not yet have a fully executed closing agreement, may request treatment under the applicable penalty terms available under the Streamlined Filing Compliance Procedures. In such a situation, the taxpayer does not need to opt out of the Offshore Voluntary Disclosure Program, but will be required to certify, as discussed above, that the failure to report was due to non-willful conduct. The IRS will review the facts and circumstances of the taxpayer’s case and determine whether to incorporate the streamlined penalty terms in the Offshore Voluntary Disclosure Program closing agreement.
Contact Nardone Law Group
Nardone Law Group routinely represents clients before the Internal Revenue Service. As you can see, there are many factors to consider when deciding whether to participate in the Streamlined Filing Compliance Procedures. If you have an undisclosed foreign account, asset, or entity, you should contact an experienced tax attorney today. Nardone Law Group’s tax attorneys will thoroughly review your case to determine which options and alternatives are available, including the Streamlined Filing Compliance Procedures.