You will note from my several earlier articles on the Federal Government’s Offshore Voluntary Disclosure Programs, OVDP, U.S. citizens, Green Card Holders and tax residents of the U.S. must prepare, disclose and file several types of to file tax and/or reporting returns for certain ownership or beneficiary interests in and transactions with foreign entities, receipt of foreign gifts, and/or financial interests and/or signature authority in foreign bank accounts if the aggregate of the foreign accounts exceeds limits of $10,000 and $50,000. Please see my recent article detailing this section.
The Internal Revenue Service, IRS, has now revisited certification forms used to apply under the Streamlined Filing Compliance Procedures, SFCP. This program allows qualifying individuals who have failed to file or pay tax on foreign financial assets to come into tax and reporting compliance while avoiding the onerous financial penalties that are the foundation of the now familiar in OVDP. The revisited specific disclosures mandate a detailed narrative explaining that the failure to report and/or pay tax was non-willful on the part of the individual applicant.
The IRS is revising the SFCP to remove many of the stricter requirements and expanding the program to include both U.S. tax resident and non-U.S. tax resident. Now, the established procedure has been bifurcated: Streamlined Domestic Offshore Procedures, SDOP and Streamlined Foreign Offshore Procedures. The SFCP filing requirements extend to only the prior three years for tax returns and six years for Foreign Bank Account Reports, FBARs. In addition to paying any additional tax and interest due for this shortened period, applicants must sign a statement certifying that they are eligible for the streamlined procedures, all required FBARs have been filed and the failure to file tax returns, report all income, pay all tax and submit all required information returns, including FBARs, was not due to the applicant’s willful conduct. If these above requirements are met, the applicant filing under the domestic procedures is liable for a 5 percent penalty (as opposed to 27.5 percent or 50 percent under the OVDP), and the applicant filing under the non-resident procedures is not liable for any penalty.
Please contact us to see if you may qualify for either of these streamlined procedures. If you qualify, then you should retain a seasoned international tax attorney to draft a complete and accurate statement supporting a finding of non-willfulness is key to gaining entry into the SFCP and paying little or no penalty. Additionally, we are competent to prepare your delinquent tax returns and information statements and past FBAR filings to ensure a maximum effort is submitted to the IRS for the best result. The consequences for failing to file an FBAR can be steep, ranging from a civil penalty for non-willful failure to file of $10,000 per year, to criminal penalties of $500,000 and/or up to 10 years in prison. The civil penalty for willful failure to file is the greater of $100,000 or 50 percent of the account balance, and the general criminal penalties include a $250,000 fine and/or up to five years in prison (increasing to 10 years in prison and/or $500,000 if the violation was part of greater criminal activity).