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Streamlined Filing Compliance Procedures

Disclaimer: The following is intended for general information only and not legal or tax advice.

Purpose of the streamlined procedures. This option is available to taxpayers certifying that their failure to disclose foreign financial assets and pay underlying taxes was nonwillful. This provides taxpayers with an opportunity for:

(1) A streamlined procedure for fling amended or delinquent returns;

(2) Terms for resolving their tax and penalty for filing amended or delinquent returns; and,

(3) Terms for resolving their tax and penalty obligations.

Eligibility for streamlined procedures. The plan is available only for individual taxpayers “Residing in the U.S.” and “Residing outside the U.S.”, and their estates.  

1- Non-willfulness. The participants must certify that the failure to report all income, pay all tax and submit all required information returns, including  FBARs were due to non-willful conduct, which is defined as conduct that is due to negligence, inadvertence, or mistake or that is the result of a good faith misunderstanding of the of the law

2- Must not have been contacted by the IRS. If the IRS has initiated a civil or criminal examination of 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.

3- Must pay previously assessed penalty on previously filed delinquent or amended returns. Taxpayers who have previously filed delinquent or amended returns in an attempt to meet their filing obligations regarding foreign financial assets (so-called “quiet disclosures” made outside of the Updated Voluntary Disclosure Practice  (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 filing will not be abated. 

4- Must have a valid Taxpayer Identification Number. All participants must have a valid Taxpayer Identification Number. U.S. citizens, resident aliens, and certain other individuals should use their Social Security Number. Others may use ITIN or include a complete Form W-7.

Considering OVDP or streamlined procedures. Taxpayers who are concerned about being subject to criminal prosecution or substantial pecuniary penalties, because their failure to report income, pay tax, and submit required information returns was willful, may consult tax attorney specialized in the field. They may seek assurance from such serious consequences and enter the IRS Updated Voluntary Disclosure Practice (OVDP).

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. Thus, no receipt of the returns will be acknowledged by the IRS. Neither there will be no signing of the IRS closing agreement. 

Tax returns submitted under either Streamlined (Foreign or Domestic) Procedures will not be subject to IRS audit automatically, but they may be chosen 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, and subject to applicable civil penalties and criminal liability.

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.  

Coordination between streamlined procedures and OVDP. Once a taxpayer makes a submission under either the Streamlined (Foreign and Domestic) Offshore Procedures, the taxpayer may not participate in OVDP. Similarly, a taxpayer who submits to an OVDP voluntary disclosure letter pursuant to OVDP FAQ 24 on or after July 1, 2014, is not eligible to participate in the streamlined procedures.

A taxpayer eligible for treatment under the streamlined procedures who submits, or who has submitted, a voluntary disclosure letter under the OVDP (or any predecessor offshore voluntary disclosure program) prior to July 1, 2014, but who does not yet have a fully executed OVDP closing agreement, may request treatment under the applicable penalty terms available under the streamlined procedures. 

NOTE: A taxpayer seeking such treatment does not need to opt out of the OVDP but will be required to certify that the failure to report all income, pay all tax, and submit all information returns, including FBARs, was due to non-willful conduct. As part of the OVDP process, the IRS will consider this request in light of all the facts and circumstances of the taxpayer’s case and will determine whether or not to incorporate the streamlined penalty terms in the OVDP closing agreement.

Zaher Fallahi, Tax Attorney, CPA, represents taxpayers nationwide with their offshore voluntary disclosure practice (OVDP), streamlined procedures, delinquent FBAR filing, delinquent international information return filing and foreign gifts. Contact Information:

(877) 687-7558 Nationwide Toll Free

(310) 719-1040 (Los Angeles)

(714) 546-4272 (Orange County)    E-mail taxattorney@zfcpa.com