Streamlined General Guidance
Historical Perspective – Streamlined
On Wednesday, June 18, 2014 the IRS re-introduced an expanded and eased Streamlined program which was originally introduced June 26, 2012 to become effective September 1, 2012 for taxpayers not under an IRS initiated civil or criminal examination. This new Streamlined program eliminated: 1) the risk IRS assessment re the $1,500 minimum unpaid tax requirement and 2) the IRS Streamlined Questionnaire, instead basing the sole determinate/requirement for the Streamlined Program on a new concept of ‘Non-Willful’ Conduct, versus a risk assessment approach
Where ‘Non-willful’ was loosely defined as: conduct that is due to negligence, inadvertence or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law. In reality conceptually the difference between Fraud- an intent to deceive versus simply Gross Negligence, where no such intent existed.
The significant part of this revised Streamlined program is the requirement to file only the last three (3) years of U.S. Income tax returns and the last six (6) years of FinCEN FBAR Form 114, in a 100% totally penalty free environment. That is no late payment and no late filing penalties, no accuracy or information penalties, you pay just the tax (if any) and interest. However the concept of criminal liability continues to be relevant as a result of conduct deemed to be “Willful”, as prior.
The penalty free concept only applies to penalties on a prospective basis, it does not apply to prior penalty assessments under prior quiet disclosures regimes. Additionally the Streamlined Foreign or Domestic Offshore filings are not subject to automatic audit, but only to regular submission audit selection processes, including matching audits.
In addition to the pre-existing Streamlined program now named the “Streamlined Foreign Offshore Procedures” program, this new Streamlined program included a new Streamlined Domestic Offshore Procedures program, with a 5% Title 26 misc. offshore penalty on the Highest Aggregate Year End Account and Asset values of Specified Foreign Financial Asset Balances. However, only with respect to previously filed tax returns. That is to say that under the Streamlined Domestic Offshore Procedures program, you may only file Amended U.S. Individual Income Tax Returns, not original.
What this means practicably is that ‘almost’ any individual who has not filed U.S. income tax returns or FinCEN Form 114 FBARs for past years can now clean up their act penalty free (under the Foreign Offshore Procedure program), no questions asked and pay on the tax owed with interest on only up to the last here (3) years.
However, we have been aware for some time now, that at any moment after being available to delinquent taxpayers for some thirteen (13) years the IRS has expressed and interest to terminate the Streamlined Program. There is no effective termination date as of yet. We have Covid-19 to thank for that, seemingly putting off a Streamlined termination date due to more overriding priorities facing the IRS.
IRS information on general Streamlined Filing Compliance Procedures may be found at: http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures
Protax has completed and are in process of completing thousands of such Streamlined filings.
Please contact us for a free consultation and for further details.