IRS Announces Efforts to Help U.S. Citizens Overseas Come into Compliance with FBAR Filing Requirements for Offshore Accounts – “the New Streamlined Procedure”
New streamlined filing compliance procedures for non-resident U.S. taxpayers went into effect on September 1, 2012. The procedures were implemented in recognition of the fact that some U.S. taxpayers living abroad have failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARSs), Form TD D 90-22.1. These new streamlined procedures are for non-residents including, but not limited to, dual citizens who have not filed U.S. income tax and information returns and need to disclose their offshore accounts.
The streamlined procedure is designed for taxpayers who have resided outside of the U.S. since January 1, 2009 and who have not filed a tax return during that same period. Taxpayers utilizing this procedure must file delinquent tax returns, with appropriate related information returns (e.g. Form 3520 or 5471), for the past three years and must file delinquent FBARs for the past six years. Outstanding tax and interest must be remitted along with the delinquent tax returns.
For those taxpayers who present a low compliance risk, the review will be expedited and the IRS will not assert penalties or pursue follow-up actions. Low compliance risk tax returns include simple returns that show less than $1,500.00 in tax due in each of the years.
Submissions that present higher compliance risk are not eligible for the streamlined processing procedures and will be subject to a more thorough review and possibly a full examination. High risk factors include:
•- Amended Tax Returns
•- Returns Claiming a Refund
•- Returns Reflecting Material Economic Activity in the United States
•- If the Taxpayer did not Declare all of his or her Income in his or her Country of Residence
•- If the Taxpayer is under IRS Audit or Examination
•- If FBAR Penalties were Previously Asserted Against the Taxpayer or the Taxpayer Received an FBAR Warning Letter
•- If the Taxpayer has a Financial Interest or Authority over a Financial Account(s) Outside of her or her County of Residence
•- If the Taxpayer has a Financial Interest in an Entity or Entities Located Outside of his or her Country of Residence
•- If there is U.S. Source Income
•- If there are Indications of Sophisticated Tax Planning or Avoidance
Taxpayers who are concerned about the risk of criminal prosecution should be advised that this new procedure does not provide protection from criminal prosecution if the IRS and Department of Justice determine that the taxpayer’s particular circumstances warrant such prosecution. If the New Streamlined Procedures are not for you, you may want to consider the Offshore Voluntary Disclosure Program .