Streamlined Filing Compliance Procedure for delinquent filers
The IRS streamlined filing compliance procedure describe below is 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 procedure is designed to provide to taxpayers in such situations with:
- A streamlined procedure for fling amended or delinquent returns, and
- Terms for resolving their tax and penalty procedure for filing amended or delinquent returns, and
- Terms for resolving their tax and penalty obligations.
As reflected below, the streamlined filing procedures that were first offered on September 1, 2012 have been expanded and modified to accommodate a broader group of U.S. taxpayers. Major changes to the streamlined procedures include:
- Extension of eligibility to U.S. taxpayers residing in the United States
- Elimination of the $1,500 tax threshold, and
- Elimination of the risk assessment process associated with the streamlined filing compliance procedure announced in 2012.
Taxpayers must certify that conduct was not willful. 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.
The streamlined procedure can be very beneficial for taxpayers because they allow the taxpayer to comply with income tax rules and regulations in a relatively easy manner. The streamlined foreign offshore procedure will protect the taxpayer from having to pay various penalties, including the failure-to-file penalties, failure-to-pay penalties, accuracy-related penalties, information return penalties, and FBAR penalties. This protection from penalties will remain in place even if the amended tax returns are later selected for audit, unless the IRS demonstrates that the original tax noncompliance was fraudulent or that the failure to file FBAR reports was the result of willful behavior. However, if, during the course of the examination, the IRS determines that an additional tax deficiency is due by the taxpayer, the taxpayer may at that point be subject to any applicable taxes and penalties for that additional deficiency.
U.S. taxpayers 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 has passed, file delinquent or amended tax returns, together with all required information returns (e.g., Forms 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).
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