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Streamlined Procedures for U.S. Taxpayers Residing In the United States

Many of our clients are interested in the new Streamlined Filing Compliance Procedures, which were recently announced by the IRS. Therefore, we are providing more general information on the Procedures.

General Eligibility: The modified Streamlined Filing Compliance Procedures are designed for only individual taxpayers, including estates of individual taxpayers. The streamlined procedures are available to both U.S. individual taxpayers residing outside of the United States and U.S. individual taxpayers residing in the United States.

Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be required to certify that the failure to report all income, pay all tax and submit all required information returns, including FBARs, was due to non-willful conduct.

If the IRS has initiated a criminal investigation or a civil examination of a taxpayer’s returns, the taxpayer will not be eligible to use these procedures.

Taxpayers who have made “quiet disclosures” may still use the Streamlined Filing Compliance Procedures. However, any penalty assessments previously made with respect to those filings will not be abated.

Eligibility. In addition to having to meet the general eligibility criteria described above, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Domestic Offshore Procedures must:

  1. fail to meet the applicable non-residency requirement described above (for joint return filers, one or both of the spouses must fail to meet the applicable non-residency requirement);
  2. have previously filed a U.S. tax return (if required) for each of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed;
  3. have failed to report gross income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR and/or one or more international information returns with respect to the foreign financial asset; and
  4. such failures resulted from non-willful conduct.

Comment: It appears that the Domestic Streamlined Program is not available to non-filers.

Scope and Effect of Domestic Streamlined Procedures. U.S. taxpayers (U.S. citizens, lawful permanent residents and those meeting the “substantial presence” test) eligible to use the Streamlined Domestic Offshore Procedures must:

  1. for each of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed (the “covered tax return period”), file amended tax returns, together with all required information returns;
  2. for each of the most recent six years for which the FBAR due date has passed (the “covered FBAR period”), file any delinquent FBARs;
  3. pay a miscellaneous offshore penalty;
  4. pay the full amount of the tax, interest and miscellaneous offshore penalty due in connection with these filings at the time the foregoing returns and FBAR are filed; and
  5. complete and sign a statement on the Certification by U.S. Person Residing in the U.S., certifying:
    (a) that the taxpayer is eligible for the Streamlined Domestic Offshore Procedures;
    (b) that all required FBARs have now been filed;
    (c) that the failure to report all income, pay all tax and submit all required information returns, including FBARs, resulted from non-willful conduct; and
    (d) that the miscellaneous offshore penalty amount is accurate.

It is important to note that a taxpayer may not file delinquent income tax returns (including Form 1040, U.S. Individual Income Tax Return) using these procedures.

The Miscellaneous Offshore Penalty is equal to 5 percent of the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period.

A foreign financial asset is subject to the 5-percent miscellaneous offshore penalty if:

  1. the asset should have been, but was not, reported on an FBAR for that year;
  2. the asset should have been, but was not, reported on a Form 8938 for that year; and
  3. the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year.

It appears that rental property, business interests, and other income-generating assets that are not required to be reported on FBAR or Form 8938 are not subject to the 5% penalty.  This is a major difference from OVDp treatment of the same assets.

A participating taxpayer will be subject only to the 5-percent miscellaneous offshore penalty and will not be subject to accuracy-related penalties, information return penalties or FBAR penalties. Even if returns properly filed under these procedures are subsequently selected for audit, no such penalties will be imposed unless the examination results in a determination that the original return was fraudulent and/or that the FBAR violation was willful. Any previously assessed penalties with respect to those years, however, will not be abated.

For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by the applicable treaty.

IRS Official Provides Insights for the new IRS Streamlined Compliance Procedures

Taxpayers who are in the Offshore Voluntary Disclosure Program to report their overseas assets can request the favorable penalty structure under newly expanded streamlined compliance procedures without giving up the audit and criminal liability protection offered by the OVDP, according to Jennifer Best, senior adviser to the IRS deputy commissioner (International).

The IRS June 18 announced it was expanding its streamlined procedures so both U.S. and non-U.S. residents who certify their tax noncompliance was non-willful can qualify for 5% or zero penalties.

At the same time, the IRS said it was making the OVDP—generally designed for taxpayers with willful failure to report their offshore assets—tougher by requiring disclosure of more information and payment of the 27.5 percent penalty up front.

In addition, the penalty will rise to 50 percent after Aug. 4 for taxpayers whose banks or facilitators of their offshore arrangements are publicly identified by the Justice Department as under investigation.

Best said taxpayers need to be very careful in asserting their conduct was non-willful through the streamlined procedures, noting that information from IRS offshore enforcement initiatives is pouring in. The government carries the burden of proving willfulness into the courtroom where “willfulness” has generally required demonstrating that the government prove the taxpayer’s actions were as a result of a “voluntary, conscious and intentional” act by the taxpayer. Taxpayers considering the streamlined procedures should carefully review the recent court decisions in United States v. Williams, No. 10-2230 (4th Cir. 2012) and United States v. McBride, No. 2:09-cv-00378 (D. Utah 2012) on the issue of determining “willfulness” for assertion of the more significant “willful” FBAR penalties (of up to 50% of the account balance, per year).

Additional considerations regarding someone being “non-willful” often include whether the existence of the account was disclosed to the return preparer or others; whether the account was at some point moved to another foreign financial institution; whether the taxpayer’s advisors had some degree of knowledge about the account; the perceived degree of financial and business sophistication and education of the taxpayer; whether foreign entities were involved as accountholders; documents provided to open the account [i.e. U.S. or foreign passport(s), identification card, etc.]; communications, if any, with others that occurred regarding bank secrecy, taxation, and/or disclosure of any foreign accounts; failure to seek independent legal advice about how to properly handle the foreign bank account and instructions or advice received regarding holding or receiving mail from the bank, etc. Further questions often lay within the responses to each of the foregoing questions.

Best said if taxpayers at the beginning of the process have already submitted their voluntary disclosure intake letters but decide they would rather apply for relief through the streamlined compliance procedures outside of the OVDP, they can do so, but should correspond with the IRS to let the government know they have changed their minds.

Best stressed that if taxpayers stay in the OVDP, they can still request the penalty structure of the streamlined program if they believe their conduct wasn’t willful.  While the transitional treatment may not be quite as favorable as the Streamlined Procedures, it is still better than the alternative, which is paying the full 27.5% or other applicable amount pursuant to the 2012 OVDI rules. While the offshore penalty under the transitional rules is reduced to the same 5% as the streamlined program, the transitional rules make no mention of the other penalties associated with OVDI.  Therefore, under the transitional rules, taxpayers are still liable for the 20% substantial understatement penalty, as well as any applicable failure to file and/or failure to pay penalties associated with your delinquent filings.

Best said even if taxpayers are denied the streamlined penalty, they will remain in the OVDP “at all times” and will still qualify for the 27.5 percent penalty and the protection from criminal prosecution.  Therefore, there seems to be little to lose to seek streamlined treatment.

Best said taxpayers who are in the OVDP and have decided to “opt out” of the process that would result in a closing agreement can request the lighter streamlined penalty as long as they haven’t received formal notice that the IRS is opening an audit.

Best counseled caution in certifications that conduct was non-willful. Best said the IRS will be cross-checking certifications against information that it gets in through treaty requests, John Doe summonses, and other government enforcement activities. “We’re still finalizing our plans of how we’re going to review these, but we’ll be balancing and cross-checking data that we get from all sources,” Best said. “We want to ensure the certifications that we’re getting are accurate and complete.”

Speaking at a separate event in New York on June 20, Best said it is possible that the IRS could go back and re-evaluate willfulness certifications if the client’s bank, through treaty requests or other means, produces account records or other information indicating the client was willfully keeping the account secret.

While the streamlined program offers a welcome option for many taxpayers with undeclared accounts, other ways to address past noncompliance remain viable, including the OVDP program and Delinquent FBAR Submission Procedures and Delinquent International Information Return Submission Procedures.

Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures. Materials from the webinar can be downloaded here: Game Changer Streamline.

How to Demonstrate Non-Willfulness Under The Streamlined Filing Compliance Procedures

The IRS recently announced Streamlined Filing Compliance Procedures in an effort to encourage U.S. taxpayers to come into compliance with their reporting and filing requirements associated with varying interests in foreign financial accounts and assets. The streamlined procedures require the filing of original or amended tax returns reporting whatever foreign source income was generated in each of the applicable tax years as well as properly report any U.S. source income and deductions for each of the applicable tax years.

For eligible U.S. taxpayers residing outside the United States, all penalties will be waived under the streamlined procedures. For eligible U.S. taxpayers residing in the United States, the only penalty under the streamlined procedures will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue. All income tax related penalties associated with the non-U.S. source income will be waived

The streamlined procedures do not provide protection from a possible criminal prosecution referral. Also taxpayers pursuing resolution of a foreign account issue within the streamlined procedures are required to certify under penalties of perjury that their conduct was “non-willful.” For purposes of the streamlined procedures, non-willful conduct is 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.

The certification requires that the taxpayer “provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs.

People who are considering opting for the more lenient, streamlined program must be aware of the meaning of “willful” in tax law. Those who sign the statement in error are at risk of severe penalties and criminal prosecution. The IRS has stated that “willfulness is determined by the facts and circumstances of each case,” and that it will depend on tax professionals “to help taxpayers get the right answer in individual cases.”

Evidence of willfulness often includes the following: having an account in a country with bank secrecy rules; holding the account in a trust, foundation or other entity typically used to conceal ownership; moving the account from a firm under U.S. pressure to another, presumably to avoid disclosure; making large cash withdrawals; instructing a firm not to mail statements to the U.S., or communicating in code with it; or having secret meetings with advisers or account representatives. The amount of money is also important: the larger the asset value, the less likely it is nonwillful.

Evidence of nonwillful behavior could include having a small account, especially in comparison to the taxpayer’s other assets; an account on which no U.S. tax is due; a foreign government-sponsored savings or pension account; minimal or no withdrawals; and no prior U.S. tax filings.

There is no perfect fact pattern or objective test for non-willful conduct.  The IRS certification requires a signed sworn statement that “[the taxpayer’s] non-willful conduct is 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.”  Furthermore the taxpayer must “provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.”  See the “non-willful” certification statement available at http://www.irs.gov/pub/irs-utl/CertUSResidents.pdf.   

Persuasive advocacy is required to affirmatively and persuasively demonstrate credible legal grounds for non-willfulness. Do not disclose too much and beware of badges (evidence) of willfulness, blind willfulness, concealment, etc. For more information see IRS IRM 4.26.16.4.5.  It is likely that the IRS will carefully monitor taxpayer filings with large accounts making fraudulent claims in the streamlined program and seek to punish them severely to send a warning.

While the streamlined program offers a welcome option for many taxpayers with undeclared accounts, other ways to address past noncompliance remain viable, including the OVDP program and Delinquent FBAR Submission Procedures and Delinquent International Information Return Submission Procedures.

Taxpayer’s Beware: Proving Non-Willful Conduct in the new IRS Streamlined Filing Compliance Procedures

Taxpayers should think carefully before entering a new Internal Revenue Service program titled Streamlined Filing Compliance Procedures for offshore-account holders whose conduct was not “willful”. On June 18th, the IRS announced significant changes to its limited-amnesty programs for U.S. taxpayers holding undeclared offshore accounts abroad. These offshore-account holders now can opt for a new “streamlined procedure.” Participants must file three years of back tax returns and six years of Foreign Bank Account Reports. Participants must also sign a statement certifying that their previous mistakes were “due to non-willful conduct.”

Under this new option, there is a 5% penalty on the balance of the undisclosed account for taxpayers living in the U.S.—and none at all for taxpayers living elsewhere.

Taxpayers in the IRS’s Offshore Voluntary Disclosure Program—for those who intentionally hid money abroad—must pay a much higher penalty: 27.5% of the account’s peak balance. Interest, other penalties and advisers’ fees can raise the total cost to about 50% of the account’s value.

People who are considering opting for the more lenient, streamlined program to be aware of the meaning of “willful” in tax law. Those who sign the statement in error are at risk of severe penalties and criminal prosecution. The IRS has stated that “willfulness is determined by the facts and circumstances of each case,” and that it will depend on tax professionals “to help taxpayers get the right answer in individual cases.”

Evidence of willfulness often includes the following: having an account in a country with bank secrecy rules; holding the account in a trust, foundation or other entity typically used to conceal ownership; moving the account from a firm under U.S. pressure to another, presumably to avoid disclosure; making large cash withdrawals; instructing a firm not to mail statements to the U.S., or communicating in code with it; or having secret meetings with advisers or account representatives. The amount of money is also important: the larger the asset value, the less likely it is nonwillful.

Evidence of nonwillful behavior could include having a small account, especially in comparison to the taxpayer’s other assets; an account on which no U.S. tax is due; a foreign government-sponsored savings or pension account; minimal or no withdrawals; and no prior U.S. tax filings.

There is no perfect fact pattern or objective test for non-willful conduct.  The IRS certification requires a signed sworn statement that “[the taxpayer’s] non-willful conduct is 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.”  Furthermore the taxpayer must “provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.”  See the “non-willful” certification statement available at http://www.irs.gov/pub/irs-utl/CertUSResidents.pdf.   Advocacy is required to affirmatively and persuasively demonstrate legal grounds for non-willfulness.  Do not disclose too much and beware of badges (evidence) of willfulness, blind willfulness, concealment, etc. For more information see IRS IRM 4.26.16.4.5.

It is likely that the IRS will carefully monitor taxpayer filings with large accounts making fraudulent claims in the streamlined program and punish them severely to send a warning.

While the streamlined program offers a welcome option for many taxpayers with undeclared accounts, other ways to address past noncompliance remain viable, including the OVDP program and Delinquent FBAR Submission Procedures and Delinquent International Information Return Submission Procedures.

Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures. Materials from the webinar can be downloaded here: Game Changer Streamline.

IRS announces new Streamlined Filing Compliance Procedures

The IRS announced substantial changes to both the Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayers and the Offshore Voluntary Disclosure Program (OVDP) on June 18, 2014.  Effective July 1, 2014, the IRS is making it easier for individuals to qualify for the new Streamlined Procedures. Taxpayers may now qualify under two scenarios:

1. U.S. citizens or permanent residents who reside outside the U.S. ($0 penalty)

Streamlined procedures for U.S. residents are referred to as the Streamlined Domestic Offshore Procedures (SDOP).  This program is for U.S. citizens or permanent residents who have physically lived outside the U.S. for at least 330 full days for any one or more of the most recent three years. These taxpayers will qualify for the $0 penalty as long as these failures resulted from non-willful conduct. SDOP description and submission instructions are available at http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States. Persons residing in the United States applying for the new streamlined procedures must complete and submit the “non-willful” certification statement available athttp://www.irs.gov/pub/irs-utl/CertUSResidents.pdf. 

Advocacy is required to affirmatively and persuasively demonstrate legal grounds for non-willfulness.  Do not disclose too much and beware of badges (evidence) of willfulness, blind willfulness, concealment, etc. For more information see IRS IRM 4.26.16.4.5.

2. U.S. citizens or permanent residents who reside in the U.S. (5 percent penalty)

Streamlined procedures for non-residents are referred to as the Streamlined Foreign Offshore Procedures (SFOP). These taxpayers will qualify for a 5 percent penalty as long as they have filed U.S. tax returns for the previous years and their failures to properly report income on their tax returns, or foreign accounts on their FBARs, resulted from non-willful conduct.

Persons residing outside the United States applying for the new streamlined procedures must complete and submit the “non-willful” certification statement available at http://www.irs.gov/pub/irs-utl/CertNonResidents.pdf.  Advocacy is required to affirmatively and persuasively demonstrate legal grounds for non-willfulness.  Do not disclose too much and beware of badges (evidence) of willfulness, blind willfulness, concealment, etc. For more information see IRS IRM 4.26.16.4.5.

 

Taxpayers in either Streamlined Program only need to file the most recent 3 years of tax returns (e.g., 2011, 2012 and 2013) and 6 years of delinquent FBARs (e.g., 2008-2013).

How to Choose?

Taxpayers who have already entered the 2012 OVDP may be eligible for transitional treatment from the 2012 OVDP. This would effectively apply the $0 or 5 percent penalty to their disclosure. Taxpayers who have not yet entered the 2012 OVDP, or who have only pre-cleared to enter the 2012 OVDP, may proceed directly through one of the 2014 Streamlined Programs.

Still Ineligible for the New Streamlined Procedures?

Taxpayers who do not qualify for one of the new Streamlined Procedures, but still qualify for the 2014 OVDP, face a one-time 27.5 percent offshore penalty based on the highest balance year unless the taxpayer has an undisclosed account at a bank listed on the IRS posted list – then it is a 50 percent penalty starting July 1, 2014. Taxpayers in the OVDP must file 8 years of income tax returns (or amended returns) and 8 years of FBARs.

Taxpayers must choose one or the other: either enter the 2014 OVDP or enter the 2014 Streamlined Programs. If rejected from the 2014 Streamlined Programs, taxpayers may not later enter the 2014 OVDP Program. Moreover the 2014 Streamlined Programs do not come with the guarantee that the IRS will not recommend criminal prosecution if rejected.

Determine Your Next Step in Light of These New IRS Changes

This alert discusses only some of the many changes made by the IRS. It is important to note that the IRS has the authority to change the terms (qualifications, penalties, etc.) whenever it chooses. Moreover, in certain situations the IRS is permitting taxpayers already in the OVDP to either adopt the rules of the new OVDP or convert their disclosure to one of the two more lenient streamlined programs – as long as the taxpayer has not yet signed the final Form 906 closing letter that is received at the conclusion of a taxpayer’s disclosure.

Anyone affected by the Streamlined Filing Compliance Procedures and the Offshore Voluntary Disclosure Program should have their individual situation carefully reviewed to determine the most advantageous route in light of these new rules.

As FATCA continues to go fully online, the cost and risk of doing nothing seems to have gone up significantly. In summary, taxpayers with undisclosed offshore accounts  should fully explore some form of voluntary disclosure before it is too late and much more costly.  Our law firm can assist in determining the IRS filing needs as well as any other international legal planning.

Our firm presented a informational webinar on the Streamlined Filing Compliance Procedures and the Offshore Voluntary Disclosure Program. Materials from the webinar can be downloaded here: Game Changer Streamline.

50% Penalty for Taxpayers Who Hold Accounts at a Bank Under Investigation

The Internal Revenue Service announced last week changes to its programs for taxpayers with undeclared offshore accounts, the latest step in a five-year campaign against such accounts held by U.S. taxpayers. The modifications greatly eased penalties for people who were unaware of tax and disclosure requirements.

At the same time, the IRS sharply increased the penalty for people in its amnesty program who intended to cheat. For taxpayers who enter the OVDP program after it becomes public that a bank where the taxpayer holds an account is under investigation by the IRS or Department of Justice, the offshore penalty is increased from 27.5% to 50% of the highest balance of the taxpayer’s foreign accounts/assets during the preceding 8 years.  Although the list may grow as FATCA is implemented, the current list of those banks include:

•      UBS AG

•      Credit Suisse AG, Credit Suisse Fides, and Clariden Leu Ltd.

•      Wegelin & Co.

•      Liechtensteinische Landesbank AG

•      Zurcher Kantonalbank

•      Swisspartners

•      CIBC FirstCaribbean International Bank Limited, its predecessors, subsidiaries, and affiliates

•      Stanford International Bank, Ltd., Stanford Group Company, and Stanford Trust Company, Ltd.

•      The Bank of N.T. Butterfield & Son Limited (also known as Butterfield Bank and Bank of Butterfield)

The IRS released the above list with 10 banks currently under investigation whose clients could be subject to the 50% penalty. It also disclosed that the higher penalty would take effect on August 4.

The IRS is quietly applying pressure to noncompliant taxpayers to come out of the dark and disclose their accounts or face extremely high penalties.

The list does not include all of the the names of other financial institutions that have surfaced in criminal cases involving individuals with offshore accounts. An IRS spokesman says that for now the list is complete, and that it will be “kept up to date.”  The IRS can add names to the list and probably will add banks after FATCA implementation over the next several months.

The IRS announcement and program changes seem to make it easier for some taxpayers and more difficult for others. Detailed analysis is required to ascertain the risk/reward for each taxpayer.  Regardless, as FATCA continues to go fully online (and the bank list grows), the cost and risk of doing nothing seems to have gone up significantly. In summary, taxpayers with undisclosed offshore accounts  should fully explore some form of voluntary disclosure before it is too late and much more costly.

New IRS Disclosure Program Announced for Non-Resident Taxpayers: Streamlined Foreign Offshore Procedures

The United States’ IRS is moving to entice more taxpayers to disclose their unreported assets and income just weeks before implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).  The IRS has announced a Streamlined Foreign Offshore Procedures (SFOP), which will significantly alter all future voluntary disclosures. The SFOP is a game changer for non-resident and resident (who would use the Streamlined Domestic Offshore Procedures (SDOP)) taxpayers alike.

The SFOP significantly expands the old Streamlined Program for Non US-residents, which was narrowly only for non-filers with less than $1500 of unreported income.  The SFOP liberalizes the old rules and rewards non-willful taxpayers to disclose offshore assets with minimal tax and a lower penalty. The SFOP requires filing only three years of amended income tax returns and assesses no penalty on any account balance. In comparison, the current OVDP program requires eight years of returns and a 27.5% penalty.

In order to be eligible, taxpayers provide a certification under penalty of perjury that the failure to report all income and submit FBARs was due to non-willful conduct and provide “specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. ” Non-willful conduct is defined by the IRS 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.  Detailed examination of any evidence of non-willful (or possible willful) conduct and careful crafting of a certification of non-willfullness is required for each taxpayer.  Qualified experienced legal counsel should analytically draft this certification, under attorney-client privilege, based on the taxpayer’s circumstances.

Once a taxpayer elects the SFOP (and consequently claims his violations were non-willful), he is no longer eligible for the OVDP.  Therefore, very careful analysis of a taxpayer’s eligibility for SFOP is very important. Risk factors including possible evidence of willfulness, such as knowledge and intent of laws and violations thereof, need to be carefully analyzed.  While taxpayers in the SFOP are not automatically audited, an SFOP filing is subject the possibility of normal audit selection. Under such audit, the taxpayer should be prepared to defend the SFOP filing and demonstrate non-willfulness and absence of fraud.

An SFOP submission must include the following:

-          Three years of most recent amended tax returns with “Streamlined Foreign Offshore” written in red to indicate that the returns are being submitted under these procedures.

-          A fully executed Certification for Streamlined Foreign Offshore Procedures.  Since the IRS asks for the specific reasons for the failure to report all income, pay all tax, and submit all required information returns, including FBARs, qualified experienced legal counsel should carefully draft this document based on your situation.

-          All tax and interest payments.

-          If applicable, a statement regarding relief for failure to timely elect deferral of income from certain retirement plans where deferral is permitted by an applicable treaty (this generally applies to Canadian retirement accounts, i.e., RRSPs).

-          A statement that six years of FBARs are being filed online via the FinCen web portal.

In summary, taxpayers with undisclosed offshore accounts (including current OVDI/OVDP participants and silent disclosers) should fully explore the SFOP and consider filing a carefully drafted SFOP submission.

 

The IRS detailed announcement of the SFOP follows below:

Eligibility for the Streamlined Foreign Offshore Procedures

In addition to having to meet the general eligibility criteria described above, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Foreign Offshore Procedures described in this section must:  (1) meet the applicable non-residency requirement described below (for joint return filers, both spouses must meet the applicable non-residency requirement described below) and (2) have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and such failures resulted from non-willful conduct.  Non-willful conduct is 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.

For information on the meaning of foreign financial asset, see the instructions for FinCEN Form 114, which may be found at FinCen and the instructions for Form 8938, which may be found at Instructions for Form 8938.

Non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents (i.e., “green card holders”):  Individual U.S. citizens or lawful permanent residents, or estates of U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days.  Under IRC section 911 and its regulations, which apply for purposes of these procedures, neither temporary presence of the individual in the United States nor maintenance of a dwelling in the United States by an individual necessarily mean that the individual’s abode is in the United States.  For more information on the meaning of “abode,” see IRS Publication 54, which may be found at Publication 54.

Example 1:  Mr. W was born in the United States but moved to Germany with his parents when he was five years old, lived there ever since, and does not have a U.S. abode.  Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.

Example 2:  Assume the same facts as Example 1, except that Mr. W moved to the United States and acquired a U.S. abode in 2012.  The most recent 3 years for which Mr. W’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011.  Mr. W meets the non-residency requirement applicable to individuals who are U.S. citizens or lawful permanent residents.

Non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents:  Individuals who are not U.S. citizens or lawful permanent residents, or estates of individuals who were not U.S. citizens or lawful permanent residents, meet the applicable non-residency requirement if, in any one or more of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the individual did not meet the substantial presence test of IRC section 7701(b)(3).  For more information on the substantial presence test, see IRS Publication 519, which may be found at IRS Publication 519.
Example 3:  Ms. X is not a U.S. citizen or lawful permanent resident, was born in France, and resided in France until May 1, 2012, when her employer transferred her to the United States.  Ms. X was physically present in the U.S. for more than 183 days in both 2012 and 2013.  The most recent 3 years for which Ms. X’s U.S. tax return due date (or properly applied for extended due date) has passed are 2013, 2012, and 2011.  While Ms. X met the substantial presence test for 2012 and 2013, she did not meet the substantial presence test for 2011.  Ms. X meets the non-residency requirement applicable to individuals who are not U.S. citizens or lawful permanent residents.

Description of Scope and Effect of Procedures

U.S. taxpayers (U.S. citizens, lawful permanent residents, and those meeting the substantial presence test of IRC section 7701(b)(3)) eligible to use the Streamlined Foreign Offshore Procedures must (1) for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, file delinquent or amended tax returns, together with all required information returns (e.g., Forms 3520, 5471, and 8938) and (2) for each of the most recent 6 years for which the FBAR due date has passed, file any delinquent FBARs (FinCEN Form 114, previously Form TD F 90-22.1).  The full amount of the tax and interest due in connection with these filings must be remitted with the delinquent or amended returns.

A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who complies with all of the instructions outlined below will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.  Even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy-related penalties with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original tax noncompliance was fraudulent and/or that the FBAR violation was willful.  Any previously assessed penalties with respect to those years, however, will not be abated.  Further, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency.

For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by the applicable treaty. The proper deferral elections with respect to such plans must be made with the submission.  See the instructions below for the information required to be submitted to make such elections.

Transition rules for taxpayers who made submissions under the 2012 Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers:  The risk assessment process associated with the 2012 Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer U.S. Taxpayers has been eliminated for all streamlined filers.  A taxpayer who has initiated participation in the 2012 Streamlined Filing Compliance Procedures prior to July 1, 2014, and has not already been notified of a high or low risk determination will not receive correspondence related to their risk determination and the returns will be processed without regard to that risk assessment.

Specific Instructions for the Streamlined Foreign Offshore Procedures

Failure to follow these instructions or to submit the items described below will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.

  1. For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed:
  • if a U.S. tax return has not been filed previously, submit a complete and accurate delinquent tax return using Form 1040, U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed on time, or
  • if a U.S. tax return has been filed previously, submit a complete and accurate amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed a complete and accurate original return.
  1. Include at the top of the first page of each delinquent or amended tax return and at the top of each information return “Streamlined Foreign Offshore” written in red to indicate that the returns are being submitted under these procedures.  This is critical to ensure that your returns are processed through these special procedures.
  2. Complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S. certifying (1) that you are eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed (see instruction 8 below); and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.  You must submit the original signed statement and you must attach copies of the statement to each tax return and information return being submitted through these procedures.  You should not attach copies of the statement to FBARs.  Failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.
  3. Submit payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts.  Your taxpayer identification number must be included on your check.  Click here to get help with the interest calculation.
  4. If you are not eligible to have a Social Security Number and do not already have an ITIN, submit an application for an ITIN along with the required tax returns, information returns, and other documents filed under these streamlined procedures. See the ITIN page on www.irs.gov for more information.
  5. If you seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, submit:
  • a statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
  • a dated statement signed by you under penalties of perjury describing:
  • the events that led to the failure to make the election,
  • the events that led to the discovery of the failure, and
  • if you relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
  • for relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.
  1. The documents listed above, together with the payments described above, must be sent in paper form (electronic submissions will not be accepted) to:Internal Revenue Service
    3651 South I-H 35
    Stop 6063 AUSC
    Attn:  Streamlined Foreign Offshore
    Austin, TX 78741

    This address may only be used for returns filed under these procedures.  For all future filings, you must file according to regular filing procedures.  

  2. For each of the most recent 6 years for which the FBAR due date has passed, file delinquent FBARs according to the FBAR instructions and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.  You are required to file these delinquent FBARs electronically at FinCen.  On the cover page of the electronic form, select “Other” as the reason for filing late.  An explanation box will appear.  In the explanation box, enter “Streamlined Filing Compliance Procedures.”  If you are unable to file electronically, you may contact FinCEN’s Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975 (if calling from outside the United States) to determine possible alternatives to electronic filing.

Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures and the Offshore Voluntary Disclosure Program. Materials from the webinar can be downloaded here: Game Changer Streamline.

IRS Announces Major New changes to the Offshore Voluntary Disclosure Program

The IRS today made significant changes to its offshore voluntary compliance programs, with the intent of providing new options to help both taxpayers residing overseas and those residing in the United States. The agency says the changes are anticipated to provide thousands of people a new avenue to come into compliance with their U.S. tax obligations.

They come as FATCA is growing worldwide. Many foreign banks are rooting out Americans with increasing vigilance.

The changes are expected to provide thousands of people a new way to come into compliance with U.S. tax obligations. The changes include an expansion of the streamlined filing compliance procedures that were announced in 2012 and important modifications to the 2012 Offshore Voluntary Disclosure Program, or OVDP. The expanded streamlined procedures are intended for U.S. taxpayers whose failure to disclose their offshore assets was non-willful.

More than 45,000 taxpayers have participated in the IRS programs so far, paying about $6.5 billion in taxes, interest and penalties. As FATCA and more global bank transparency kicks in July 1, 2014, the IRS can expect even more.

The changes include a new set of Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers.

“This opens a new pathway for people with offshore assets to come into tax compliance,” said IRS Commissioner John Koskinen. “The new versions of our offshore programs reflect a carefully balanced approach to ensure everyone pays their fair share of taxes owed. Through the changes we are announcing today, we provide additional flexibility in key respects while maintaining the central components of our voluntary programs.”

Balanced against the modified programs is the government’s ongoing effort to combat the misuse of offshore assets. The IRS, working closely with the U.S. Department of Justice, continues to investigate foreign financial institutions that may have assisted U.S. taxpayers in avoiding their tax filing and payment obligations. In addition, on July 1, the new information reporting regime resulting from the Foreign Account Tax Compliance Act (FATCA) will go into effect. Thousands of foreign financial institutions will begin to report to the IRS the foreign accounts held by U.S. persons.

The current Offshore Voluntary Disclosure Program was launched in 2012 and is the successor to prior voluntary programs offered in 2011 and 2009. Since the launch of the first program, more than 45,000 taxpayers have come into compliance voluntarily, paying about $6.5 billion in taxes, interest and penalties.

The expansion of the streamlined procedures and modifications to OVDP reflect the thoughtful input of the tax community given the growing awareness among U.S. taxpayers of their offshore tax obligations.

“Through our enforcement efforts and implementation of FATCA, taxpayers are more aware of their obligations, and we believe want to come into compliance,” Koskinen said. “In this rapidly changing environment, we listened to feedback from the tax community as well as the National Taxpayer Advocate about our voluntary programs. We have made important adjustments to provide opportunities for all U.S. taxpayers to come in, including those who are not willfully hiding assets.”

Streamlined Procedures Expanded

The changes announced today make key expansions in the streamlined procedures to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts.

The original streamlined procedures announced in 2012 were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a “risk” questionnaire.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The changes include:

  • Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year;
  • Eliminating the required risk questionnaire;
  • Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.

For eligible U.S. taxpayers residing outside the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.

Offshore Voluntary Disclosure Program (OVDP) Modified

The changes announced today also make important modifications to the OVDP. The changes include:

  • Requiring additional information from taxpayers applying to the program;
  • Eliminating the existing reduced penalty percentage for certain non-willful taxpayers in light of the expansion of the streamlined procedures;
  • Requiring taxpayers to submit all account statements and pay the offshore penalty at the time of the OVDP application;
  • Enabling taxpayers to submit voluminous records electronically rather than on paper;
  • Increasing the offshore penalty percentage (from 27.5% to 50%) if, before the taxpayer’s OVDP pre-clearance request is submitted, it becomes public that a financial institution where the taxpayer holds an account or another party facilitating the taxpayer’s offshore arrangement is under investigation by the IRS or Department of Justice.

The changes seem to make it easier for some taxpayers and more difficult for others. Detailed analysis is required to ascertain the risk/reward for each taxpayer. Regardless, as FATCA continues to go fully online, the cost (and risk) of doing nothing seems to have gone up significantly.

Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures. Materials from the webinar can be downloaded here: Game Changer Streamline.

New Streamlined Domestic Offshore Procedures (SDOP) is a Game Changer

The IRS has announced a Streamlined Domestic Offshore Procedures (SDOP), which will significantly alter all future voluntary disclosures. The SDOP is a game changer for residents and non-resident (who would use the Streamlined Foreign Offshore Procedures (SFOP)) taxpayers alike.

The SDOP liberalizes the old rules and rewards non-willful taxpayers to disclose offshore assets with minimal tax and a lower penalty. The SDOP requires filing only three years of amended income tax returns and assesses a 5% penalty of the highest account balance. In comparison, the current OVDP program requires eight years of returns and a 27.5% penalty.

The SDOP mimics, but significantly and radically expands, the old Streamlined Program for Non US-residents, which was narrowly only for non-filers with less than $1500 of unreported income.  Once a taxpayer elects the SDOP (and consequently claims his violations were non-willful), he is no longer eligible for the OVDP.  Therefore, very careful analysis of a taxpayer’s eligibility for SDOP is very important. Risk factors including possible evidence of willfulness, such as knowledge and intent of laws and violations thereof, need to be carefully analyzed.  While taxpayers in the SDOP are not automatically audited, an SDOP filing is subject the possibility of normal audit selection. Under such audit, the taxpayer should be prepared to defend the SDOP filing and demonstrate non-willfulness and absence of fraud.

An SDOP submission must include the following:

-          Three years of most recent amended tax returns with “Streamlined Domestic Offshore” written in red to indicate that the returns are being submitted under these procedures.

-          A fully executed Certification by U.S. Person Residing in the United States  for Streamlined Domestic Offshore Procedures.  Since the IRS asks for the specific reasons for the failure to report all income, pay all tax, and submit all required information returns, including FBARs, qualified experienced legal counsel should carefully draft this document based on your situation.

-          All tax and interest payments.

-          The 5% miscellaneous offshore penalty.

-          If applicable, a statement regarding relief for failure to timely elect deferral of income from certain retirement plans where deferral is permitted by an applicable treaty (this generally applies to Canadian retirement accounts, i.e., RRSPs).

-          A statement that FBARs are being filed online via the FinCen web portal.

In summary, taxpayers with undisclosed offshore accounts (including current OVDI/OVDP participants and silent disclosers) should fully explore the SDOP and consider filing a carefully drafted SDOP submission.

 

The IRS detailed announcement of the SDOP follows below:

Eligibility for the Streamlined Domestic Offshore Procedures

In addition to having to meet the general eligibility criteria described above, individual U.S. taxpayers, or estates of individual U.S. taxpayers, seeking to use the Streamlined Domestic Offshore Procedures described in this section must:  (1) fail to meet the applicable non-residency requirement described in section 2.A. above (for joint return filers, one or both of the spouses must fail to meet the applicable non-residency requirement described in 2.A. above); (2) have previously filed a U.S. tax return (if required) for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed; (3) have failed to report gross income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) and/or one or more international information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) with respect to the foreign financial asset, and (4) such failures resulted from non-willful conduct.  Non-willful conduct is 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.

For information on the meaning of foreign financial asset, see the instructions for FinCEN Form 114and the instructions for Form 8938.

Description of Scope and Effect of Procedures

U.S. taxpayers (U.S. citizens, lawful permanent residents, and those meeting the substantial presence test of IRC section 7701(b)(3)) eligible to use the Streamlined Domestic Offshore Procedures must (1) for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed (the “covered tax return period”), file amended tax returns, together with all required information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621), (2) for each of the most recent 6 years for which the FBAR due date has passed (the “covered FBAR period”), file any delinquent FBARs (FinCEN Form 114, previously Form TD F 90-22.1), and (3) pay a Title 26 miscellaneous offshore penalty. The full amount of the tax, interest, and miscellaneous offshore penalty due in connection with these filings should be remitted with the amended tax returns.

The Title 26 miscellaneous offshore penalty is equal to 5 percent of the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period. For this purpose, the highest aggregate balance/value is determined by aggregating the year-end account balances and year-end asset values of all the foreign financial assets subject to the miscellaneous offshore penalty for each of the years in the covered tax return period and the covered FBAR period and selecting the highest aggregate balance/value from among those years.

A foreign financial asset is subject to the 5-percent miscellaneous offshore penalty in a given year in the covered FBAR period if the asset should have been, but was not, reported on an FBAR (FinCEN Form 114) for that year. A foreign financial asset is subject to the 5-percent miscellaneous offshore penalty in a given year in the covered tax return period if the asset should have been, but was not, reported on a Form 8938 for that year. A foreign financial asset is also subject to the 5-percent miscellaneous offshore penalty in a given year in the covered tax return period if the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year.

For information on the meaning of foreign financial asset, see the instructions for FinCEN Form 114and the instructions for Form 8938. For example, foreign financial assets may include:

  1. Financial accounts held at foreign financial institutions;
  2. Financial accounts held at a foreign branch of a U.S. financial institution;
  3. Foreign stock or securities not held in a financial account;
  4. Foreign mutual funds; and
  5. Foreign hedge funds and foreign private equity funds.

A taxpayer who is eligible to use these Streamlined Domestic Offshore Procedures and who complies with all of the instructions below will be subject only to the Title 26 miscellaneous offshore penalty and will not be subject to accuracy-related penalties, information return penalties, or FBAR penalties.  Even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to accuracy-related penalties with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original return was fraudulent and/or that the FBAR violation was willful.  Any previously assessed penalties with respect to those years, however, will not be abated.  Further, as with any U.S. tax return filed in the normal course, if the IRS determines an additional tax deficiency for a return submitted under these procedures, the IRS may assert applicable additions to tax and penalties relating to that additional deficiency.

For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by the applicable treaty. The proper deferral elections with respect to such plans must be made with the submission.  See the instructions below for the information required to be submitted with such requests.

Specific Instructions for the Streamlined Domestic Offshore Procedures

Failure to follow these instructions or to submit the items described below will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.

  1. For each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, submit a complete and accurate amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return, together with any required information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) even if these information returns would normally not be submitted with the Form 1040 had the taxpayer filed a complete and accurate original return.  You may not file delinquent income tax returns (including Form 1040, U.S. Individual Income Tax Return) using these procedures.
  2. Include at the top of the first page of each amended tax return “Streamlined Domestic Offshore” written in red to indicate that the returns are being submitted under these procedures. This is critical to ensure that your returns are processed through these special procedures.
  3. Complete and sign a statement on the Certification by U.S. Person Residing in the U.S.certifying:  (1) that you are eligible for the Streamlined Domestic Offshore Procedures; (2) that all required FBARs have now been filed (see instruction 9 below); (3) that the failure to report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct; and (4) that the miscellaneous offshore penalty amount is accurate (see instruction 5 below).  You must maintain your foreign financial asset information supporting the self-certified miscellaneous offshore penalty computation and be prepared to provide it upon request.  You must submit an original signed statement and attach copies of the statement to each tax return and information return being submitted through these procedures.  You should not attach copies of the statement to FBARs.  Failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.
  4. Submit payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts.  Your taxpayer identification number must be included on your check.  Click here to get help with the interest calculation.  You may receive a balance due notice or a refund if the tax or interest is not calculated correctly.
  5. Submit payment of the Title 26 miscellaneous offshore penalty as defined above.
  6. If you seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, submit:
  • a statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
  • a dated statement signed by you under penalties of perjury describing:
  • the events that led to the failure to make the election,
  • the events that led to the discovery of the failure, and
  • if you relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
  • for relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.
  1. The documents listed above, together with the payments described above, must be sent in paper form (electronic submissions will not be accepted) to:Internal Revenue Service
    3651 South I-H 35Stop 6063 AUSC
    Attn:  Streamlined Domestic Offshore
    Austin, TX 78741

    This address may only be used for returns filed under these procedures.  For all future filings, you must file according to regular filing procedures.  

  2. For each of the most recent 6 years for which the FBAR due date has passed, file delinquent FBARs according to the FBAR instructions and include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.  You are required to file these delinquent FBARs electronically at FinCen.  On the cover page of the electronic form, select “Other” as the reason for filing late.  An explanation box will appear.  In the explanation box, enter “Streamlined Filing Compliance Procedures.”  If you are unable to file electronically, you may contact FinCEN’s Regulatory Helpline at 1-800-949-2732 or 1-703-905-3975 (if calling from outside the United States) to determine possible alternatives to electronic filing.

Our firm presented an informational webinar on the Streamlined Filing Compliance Procedures. Materials from the webinar can be downloaded here: Game Changer Streamline.