When you’re considering streamlined filing compliance, you’ll find yourself debating the benefits of both Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. While it’s in your best interest to consult with an international tax lawyer before selecting a procedure, keep reading to learn more about each process and its benefits.
What Is Streamlined Compliance?
International tax enforcement and compliance are high priorities for the Internal Revenue Service (IRS). It’s potentially a large revenue source for the agency — even if your failure to report was non-willful, the IRS can charge you up to $10,000 per account for each year you were in violation. Thankfully, the IRS also offers ways to bring yourself into compliance without harsh penalties. One of those options is complying with either its Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures.
If your IRS violations were non-willful, you can achieve compliance through the streamlined offshore procedures. Depending on your circumstances, you might qualify for either Streamlined Domestic or Foreign Offshore Procedures.
- Streamlined Domestic Offshore Procedures: available to non-foreign residents who made non-willful offshore violations and otherwise filed a timely income tax return
- Streamlined Foreign Offshore Procedures: available to foreign residents who meet the IRS’ 330-day rule and have non-willful violations
If you need help assessing your eligibility for either program, contact the Randall & Associates for a confidential evaluation.
Why Should I Attempt Streamlined Compliance?
While completing the IRS’ Streamlined Offshore Compliance procedures doesn’t necessarily protect you from criminal prosecution, the program does offer significant penalty relief for non-willful violations. Instead, the agency agrees to accept reduced penalties in exchange for voluntary compliance with its rules and regulations.
If your offshore violations were truly non-willful, the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures are a simplified and less expensive way to get back into the good graces of the IRS. However, you should never try to sneak willful violations into the Streamlined Offshore Procedures. If the IRS deems your violations to be willful, you’ll likely face increased penalties and potentially criminal prosecution. When in doubt, it’s always best to consult with an international tax lawyer.
However, you shouldn’t postpone your international tax compliance. In March 2018, the IRS announced that another popular offshore tax compliance program, the Offshore Voluntary Disclosure Program (OVDP) would end in September 2018. This is a stark reminder that the agency’s international tax compliance programs all have a shelf life — and the IRS has openly discussed terminating the Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures as well. If you know you need to report international assets to the IRS, now is the time to act.
What Are Non-Willful Violations?
The IRS’ definition of “willful” is much more nuanced than you might expect. A willful violation involves a voluntary or intentional violation of your duties under the Tax Code. If you know that you had FBAR reporting obligations and ignored them, this is a willful violation. However, ignorance of the law isn’t always a defense.
In addition to your understanding of international tax law, the IRS will look at the facts surrounding your violation, looking for evidence of willfulness.
- Did you conceal your international accounts?
- Did you work with a financial planner, CPA, or another professional who should have notified you of your duties?
- Was your CPA aware of your international assets and offshore accounts?
- Are you otherwise compliant with U.S. and other tax laws?
It’s important to understand that the IRS won’t necessarily accept your assertion that your violations were non-willful at face value.
If the IRS believes your violations were willful, they can demand massive penalties and seek criminal charges against you. Before you file under the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures, consult with an experienced international tax lawyer at FIRM.
We can help you assess the strength of your streamlined claim and determine whether you might run afoul of the IRS’ prohibition on willful violations. And if your tax violations are willful, we can help you build a plan that brings you into compliance.
Filing Under the Streamlined Offshore Compliance Procedures
To file under the Streamlined Domestic Offshore Procedures, you must:
- File amended tax returns for the last three years, reporting all previously unreported foreign income and accounts to the IRS
- File six years’ worth of FBAR forms (Report of Foreign Bank and Financial Accounts)
- Pay your unpaid taxes and interest
- Pay a 5% penalty of your highest year’s aggregate value
A Streamlined Foreign Offshore Procedure involves a similar process:
- Update your past three years of tax filings to accurately reflect your international accounts and income
- Provide the IRS with FBARs for the past six years
- Pay income taxes and interest on your international accounts and income
Notably, the IRS doesn’t charge a penalty to foreign residents. To be considered a foreign resident, you must meet specific rules about your presence and connection to the United States. To learn whether you qualify as a foreign resident contact Randall & Associates directly.
While this processes might sound simple, it’s easy to make costly mistakes. When you work with an international tax lawyer at Randall & Associates, we will carefully prepare and review your tax filings. Our goal is to ensure your compliance with U.S. tax laws and minimize your liability. To learn more about our approach to Streamlined Offshore Compliance, contact us for a complimentary and confidential evaluation.
We Guide Our Clients Towards International Tax Compliance
The United States’ approach towards international income is complicated and confusing. For example, unlike many countries, the U.S. charges taxes on international, passive income. It’s easy to miss a form, especially if you haven’t had an experienced international tax professional helping you. For example, many people with international income and offshore accounts are unaware of their duty to file FBARs, FATCA, and Foreign Gift forms. However, if the IRS discovers your violations, you might face significant penalties.
At Randall & Associates, we help our clients understand their international tax obligations, identify their violations, and construct plans that bring them into compliance. Throughout this process, we look carefully for factors that might minimize or eliminate their IRS penalties.
Talk to an International Tax Lawyer About Your Streamlined Offshore Compliance Options
At Randall & Associates, we assist clients with a wide variety of international tax compliance issues, ranging from the simple to the very complex. If you have questions about the Streamlined Domestic Offshore Procedures or Streamlined Foreign Offshore Procedures, contact us for a consultation.