Streamlined Offshore Disclosure
If you have delinquent FBARs, you may qualify for the streamlined filing compliance procedures. The streamlined filing compliance procedures (also known as the streamlined offshore disclosure) are available to taxpayers certifying that their failure to report foreign financial assets and pay all tax due did not result from willful conduct. You must amend tax returns and file delinquent FBARs as part of the disclosure. Moreover, the main difference between this program and the traditional OVDP is that the non-willfulness certification. The IRS may examine the disclosure package to determine whether all the information is accurate and to review the willfulness element. If the IRS believes that your disclosure was due to willful conduct, the IRS can increase the penalties associated with the noncompliance.
The streamlined procedures are designed to provide to taxpayers with:
- a streamlined procedure for fling amended or delinquent returns;
- terms for resolving their tax and penalty procedure for filing amended or delinquent returns; and
- terms for resolving their tax and penalty obligations.
Eligibility Criteria for the Streamlined Procedures
The streamlined filing compliance procedures are designed only for 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
What are the Requirements?
U.S. taxpayers (U.S. citizens, lawful permanent residents, and those meeting the substantial presence test of IRC section 7701(b)(3)) eligible to use the Streamlined Foreign Offshore Procedures must (1) 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, file delinquent or amended tax returns, together with all required information returns (e.g., Forms 3520, 5471, and 8938) and (2) for each of the most recent 6 years for which the FBAR due date has passed, file any delinquent FBARs (FinCEN Form 114, previously Form TD F 90-22.1). The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.
Streamlined Filing Procedures Miscellaneous Penalty
A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who complies with all of the procedures and instructions will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
Instead, the miscellaneous offshore penalty is equal to 5 percent of the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the penalty during the years in the covered tax return period and the covered FBAR period. For this purpose, the highest aggregate balance/value is determined by aggregating the year-end account balances and year-end asset values of all the foreign financial assets subject to the penalty for each of the years in the covered tax return period and the covered FBAR period. Then, you will select the highest aggregate balance/value from among those years.
Streamlined Offshore Disclosure
If you have questions about FBAR compliance or the streamlined offshore disclosure program, contact a tax attorney at Disparte Tax Law today for a free consultation.