Streamlined Domestic Offshore Procedures –
Eligibility – Streamlined Domestic Offshore Procedures
To meet the applicable eligibility requirements for this program, 1) taxpayers must fail to meet the nonresidence requirements- see- Nonresidence Requirements- Streamlined Foreign Offshore Procedures– (if a married joint filing, both taxpayers must meet), 2) having previously filed a U.S. tax return (if required to) for each of the three (3) most recent years and 3) taxpayers must have failed to report income from a Foreign Financial Asset (FFA) and pay tax as required by U.S. tax law, and may have failed to file a FinCen FBAR Form 114 FBAR all resulting from non-willful conduct.
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.
Filing Requirements- Streamlined Domestic Offshore Procedures
U.S. taxpayers eligible for the Streamlined Domestic Offshore Procedures as outlined above must:
1) for each of the most recent three (3) years for which the U.S. income tax return due date (or properly applied for extended due date) has passed (“closed year”) file amended returns together with all information-returns and
2) for each of the most recent six (6) years of FinCEN FBAR Form 114 due dates that have passed, file any delinquent FinCEN FBAR Form 114 and
3) pay any Title 26 Misc Offshore Penalty.
The full amount of tax, interest and Title 26 Misc Offshore Penalty due in connection with these filings must be remitted with the amended returns.
The Title 26 Misc. Offshore Penalty is equal to 5% of the highest aggregate balance/ value of the taxpayers FFA that are subject to the Misc. Offshore Penalty during the years in the covered tax return period and the covered FinCEN FBAR Form 114 period.
The highest aggregate balance/ value is determined by aggregating the year end account balances and year end asset values of all FFA’s subject to the Misc. Offshore Penalty for each of the years in the covered tax return period and the covered FinCEN FBAR Form 114 period and selecting the highest aggregate balance/ value from amount those years.
An FFA is subject to the 5% offshore penalty in a given year if it should have been but was not: 1) reported as a FinCEN FBAR Form 114 for that year, 2) reported on a IRS FATCA Form 8938 or 3) gross income in respect of the FFA’s was not reported in that year.
U.S. taxpayers eligible for the Streamlined Domestic Offshore Procedures and who comply with the requirements as outlined, are not subject to any late filing, late payments, accuracy or information penalties. Even if subsequently selected for audit, unless an audit uncovers tax that the noncompliance was fraudulent or FinCEN FBAR Form 114 was a willful violation, the taxpayer will not be subjected to any late filing, late payments, accuracy or information penalties or FBAR penalties.
Any prior assess penalties with respect to (w.r.t.) those covered Streamlined years will not be abated. The above also does not stop additional tax assessment or penalties relating to that additional assessment of tax, as with any U.S. tax return filing.
Filing Instructions- Streamlined Domestic Offshore Procedures
1) Submit the three (3) prior years of U.S. income tax returns 1040X as may be the case, with all Information returns even if filed separately.
2) At top of each U.S income tax return and information return “Streamlined Domestic Offshore” should be written in red ink.
3) Complete and sign “Form 14654- Certification by U.S. Person Residing in United States for Streamlined Domestic Offshore Procedures”,
4) Submit payment of all tax and interest (interest calculator linked),
5) Payment of Title 26 Misc. Offshore Penalty
6) If no SSN then submit Form W-7- Application for IRS Individual Taxpayer Identification Number,
7) Relief/ failure to timely elect deferral of income from certain retirement or savings plans procedures, see instructions
8) Send documents and payment to specified address:
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Domestic Offshore
Austin, TX 78741
9) All FinCEN FBAR Form 114 FBARs must be filed electronically, choosing as a delinquent reason Other and type in “Streamlined Filing Compliance Procedures”.
Information on the Streamlined Domestic Offshore Procedures may be found at:
http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States
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.