Streamlined Filing Compliance Procedures - extension of 2012 OVDI

IRS introduced new procedure to get in compliance with reporting of foriegn accounts and unreported interest income on those account . The new procedure is an extension of 2012 OVDI but simper in procedure also the penalty got reduced to 5 % .

Below are the details for being eligible for Streamlined Filing Comliance Procedures.

Purpose of the streamlined procedures: 

 

The streamlined filing compliance procedures described above are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.  The streamlined procedures are designed to provide to taxpayers in such situations (1) a streamlined procedure for filing amended or delinquent returns and (2) terms for resolving their tax and penalty obligations.  These procedures will be available for an indefinite period until otherwise announced.

 

Major changes to the streamlined procedures include:  (1) extension of eligibility to U.S. taxpayers residing in the United States, (2) elimination of the $1,500 tax threshold, and (3) elimination of the risk assessment process associated with the streamlined filing compliance procedure announced in 2012.

 

General eligibility for the streamlined procedures:  

 

The  streamlined filing compliance procedures are designed for only individual taxpayers, including estates of individual taxpayers.  The streamlined procedures are available to both U.S. individual taxpayers residing outside the United States and U.S. individual taxpayers residing in the United States.  Descriptions of the specific eligibility requirements for the streamlined procedures for both non-U.S. residents (the “Streamlined Foreign Offshore Procedures”) and U.S. residents (the “Streamlined Domestic Offshore Procedures”) are set forth below.Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be required to certify, in accordance with the specific instructions set forth below, that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct

 

If the IRS has initiated a civil examination of a taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.  Taxpayers under examination may consult with their agent.  Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.  

Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called “quiet disclosures” made outside of the OVDP or its predecessor programs) may still use the streamlined procedures by following the instructions set forth below.  However, any penalty assessments previously made with respect to those filings will not be abated.

All tax returns submitted under the streamlined procedures must have a valid Taxpayer Identification Number (TIN).  For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security Number (SSN).  For individuals who are not eligible for an SSN, an Individual Taxpayer Identification Number (ITIN) is a valid TIN.  Tax returns submitted without a valid SSN or ITIN will not be processed under the streamlined procedures.  However, for taxpayers who are ineligible for an SSN but do not have an ITIN, a submission may be made under the streamlined procedures if accompanied by a complete ITIN application.

 

General treatment under the streamlined procedures:

Tax returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be processed like any other return submitted to the IRS.  Consequently, receipt of the returns will not be acknowledged by the IRS and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS.

 

Returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will not be subject to IRS audit automatically, but they may be selected for audit under the existing audit selection processes applicable to any U.S. tax return and may also be subject to verification procedures in that the accuracy and completeness of submissions may be checked against information received from banks, financial advisors, and other sources.  Thus, returns submitted under the streamlined procedures may be subject to IRS examination, additional civil penalties, and even criminal liability, if appropriate.

  

Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and who therefore seek assurances that they will not be subject to criminal liability and/or substantial monetary penalties should consider participating in the Offshore Voluntary Disclosure Program (OVDP) and should consult with their professional tax or legal advisers.

 

After a taxpayer has completed the streamlined filing compliance procedures, he or she will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures.