Streamlined and OVDP Procedure FAQ

What are the eligibility criteria for the streamlined procedures?

The modified streamlined filing compliance procedures are designed only for individual taxpayers, including estates of individual taxpayers. The streamlined procedures are available to both U.S. individual taxpayers residing outside the United States and U.S. individual taxpayers residing in the United States. Descriptions of the specific eligibility requirements for the streamlined procedures for both non-U.S. residents (the "Streamlined Foreign Offshore Procedures") and U.S. residents ("Streamlined Domestic Offshore Procedures") are set forth below:

• Taxpayers must certify that conduct was not willful. Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, will be required to certify, in accordance with the specific instructions set forth below, that the failure to report all income, pay all tax and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22,1) was due to 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

• The IRS MUST NOT have initiated a civil examination of potentially undisclosed assets. If the IRS has initiated a civil examination of taxpayer's returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures. Taxpayers under examination may consult with their agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.

• Taxpayers eligible to use streamlined procedures who have previously filed delinquent or amended returns must pay previous penalty assessments. Taxpayers eligible to use the streamlined procedures who have previously filed delinquent or amended returns in an attempt to address U.S. tax and information reporting obligations with respect to foreign financial assets (so-called "quiet disclosures" made outside of the Offshore Voluntary Disclosure Program (OVDP) or its predecessor programs) may still use the streamlined procedures by following the instructions set forth below. However, any penalty assessments previously made with respect to those filing will not be abated.

• Taxpayers who want to participate in the streamlined procedures need a valid Taxpayer Identification Number. All returns submitted under the streamlined procedures must have a valid Taxpayer Identification Number. For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security Number (SSN). For individuals who are not eligible for an SSN or ITIN, your tax return will not be processed under the streamlined procedures. However, for taxpayers who are ineligible for an SSN but do not have an ITIN, a submission may be made under the streamlined procedures if accompanied by a complete ITIN application. Additional information on getting an ITIN is available.

OVDP or streamlined procedures

Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and who therefore seek assurance that they will not be subject to criminal liability and/or substantial monetary penalties should consider participating the Offshore Voluntary Disclosure Program and should consult with their professional or legal advisers.

General treatment under the streamlined procedures

Tax returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be processed like any other return submitted to the IRS. Consequently, receipt of the returns will not be acknowledged by the IRS and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS.

Returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will not be subject to IRS audit automatically, but they may be selected for audit under the existing audit selection processes applicable to any U. S. tax return and may also be subject to verification procedures in that the accuracy and completeness of submissions may be checked against information received from banks, financial advisors, and other sources. Thus, returns submitted under the streamlined procedures may be subject to IRS examination, additional civil penalties, and even criminal liability, if appropriate. Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and who therefore seek assurances that they will not be subject to criminal liability and/or substantial monetary penalties should consider participating in the Offshore Voluntary Disclosure Program and should consult with their tax professional or legal advisers.

After a taxpayer has completed the streamlined filing compliance procedures, he or she will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures.

Coordination between streamlined procedures and OVDP

Once a taxpayer makes a submission under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, the taxpayer may not participate in OVDP. Similarly, a taxpayer who submits to an OVDP voluntary disclosure letter pursuant to OVDP FAQ 24 on or after July 1, 2014, is not eligible to participate in the streamlined procedures.

A taxpayer eligible for treatment under the streamlined procedures who submits, or who has submitted, a voluntary disclosure letter under the OVDP (or any predecessor offshore voluntary disclosure program) prior to July 1, 2014, but who does not yet have a fully executed OVDP closing agreement, may request treatment under the applicable penalty terms available under the streamlined procedures.

NOTE: A taxpayer seeking such treatment does not need to opt out of the OVDP but will be required to certify, in accordance with the instructions set forth below, that the failure to report all income, pay all tax, and submit all information returns, including FBARs, was due to non-willful conduct. As part of the OVDP process, the IRS will consider this request in light of all the facts and circumstances of the taxpayer's case and will determine whether or not to incorporate the streamlined penalty terms in the OVDP closing agreement.

Your Offshore Compliance Options

2012 Offshore Voluntary Disclosure Program

Delinquent FBAR Submission Procedures

Delinquent International Information Return Submission Procedures

Instructions for Streamlined Procedures

U S Taxpayers Residing in the United States

U S Taxpayers Residing Outside the United States

FAQ

1) I heard about another program called OVDP. What is the difference between it and the Streamlined Procedure and which do you recommend?

IRS has two programs for taxpayers who are currently non-compliant with tax returns and FBARs - Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Procedure (SP). Most attorneys will recommend the OVDP while tax practitioners to favor the SP. We believe that most clients are significantly better served by the Streamlined Procedure.

OVDP - which does require a lawyer's assistance, means a huge expense for the client. It involves filing 8 years of tax returns, paying tax and penalties due for all years, paying FBAR civil penalties, and paying lawyer fees for OVDP assistance. In other words - it's a much better deal for the attorney involved than the client.

Streamlined Procedure, on the other hand, only involved filing 3 years of returns and 6 years of FBARs. Most importantly - the fees are automatically waived. The cost involved is also significantly cheaper (attorney cost alone for OVDP starts at $10,000 - on top of the tax preparation fees).

The only occasion where OVDP is preferred, is when the IRS has already started a civil investigation. In such case OVDP serves to keep the consequent penalties at bay.

2. What happens if you analyze my situation and determine that the Streamlined Procedure won't be an option - what can I do in that case?

In many cases not meeting all conditions for the Streamlined Foreign Offshore Procedure (i.e. having been previously contacted by the IRS) - is not a reason not to apply. There is no downside to applying for the Streamlined Foreign Offshore Procedure. If your application is rejected, you will not be granted a waiver of penalties. However, you still can establish the Statute of Limitations.  You do not give up the opportunity to get waiver of penalties if the IRS determines the facts presented on the Certification Letter satisfactory to prove the non-voluntary nature of tax delinquency.

If you happen to have factors that cross out any chance to be accepted into the program (i.e. not meeting the non-residency qualification test) - then we will help you file outside of the procedure under the same scope of filing years. As opposed to the Streamlined Procedure you will not automatically get amnesty from FBAR penalties - however, in most cases IRS does no apply penalties as long as you file voluntarily and provided full disclosure of your financial situation.

3) If I have already been accepted into the Offshore Voluntary Disclosure Program but I qualify for the Streamlined Procedures, can I request to switch into the Streamlined Procedure?

Short answer - Yes.

If you qualify for the Streamlined Procedure but have been accepted into one of the offshore voluntary disclosure programs prior to September 1, 2012, you may opt out of the offshore voluntary disclosure program and request the Streamlined Procedure.

To opt out, you need to inform the examiner of your decision in writing. This is an irrevocable election and you will receive a notification letter confirming this. The examiner assigned to your case will then be able to make a risk determination of your submission and close your case according to the Streamlined Procedure. If all submission items for the voluntary disclosure program have already been submitted to the IRS, you will not be required to make a second submission for the Streamlined Procedures.

4) Can a married couple file together for the Streamlined Procedure? Is our fee the same for one person or married couple?

• Yes - as long as they filed jointly.
• Price is the same as for individual SP. However - if they have separate foreign accounts and need duplicate set of FBARs, this will add an extra $75 per FBAR form.

5) I am up to date with my tax returns, but I have not filed FBAR for ALL my non-US accounts -- what are my options?

The US treasury requires that US Citizens/GC Holders remain current and compliant with FBAR requirements for the last 6 years. Your filing option depends on whether you had non-reported interest from foreign bank accounts and whether you are subject to additional reporting requirements.

• If interest from foreign bank accounts was reported on the original returns - File FBAR through the Delinquent FBAR Submission Procedure http://www.irs.gov/Individuals/International-Taxpayers/Delinquent-FBAR-Submission-Procedures without amending tax returns. Cost - $500 for 6 years of filing (up to 5 accounts per year).
• If interest from accounts was not reflected on the tax returns, file amended returns and FBAR reports through the Streamlined Foreign Offshore Procedure: http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States. Cost - $1200 (or $1400 if over $100k income) + $240 (3 years of amended returns, discounted by 20%) and $300 for Streamlined Certification Letter
• If form 8938 (Statement of Specified Foreign Assets) aka FATCA was required, but not produced, file amended returns, FATCA and FBAR reports through the Streamlined Foreign Offshore Procedure: http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States. $1,400 for the SP + $240 ($100 X 3 * 20% discount for multiple years) for FATCA (8938) and $300 for streamlined certification letter.

6) I'm up to date with my tax returns, but I did not file 5471 for my foreign corporation. What should I do?

• There is a special program for this - the Delinquent Informational Return Program. This program is also utilized for failure to report other informational returns (ie - Foreign Trust 3520-A)
• Participating in this program would entail 3 amended returns for each of the past 3 years (assuming you have not filed the informational return for all three years), and forms 5471 (assuming that is the missing form) for each year. Finally, a reasonable cause statement must be attached.
• Potential for filing FATCA (form 8938) if the balance on the company accounts (previously unreported) puts the taxpayer over the threshold

If you are at least a 10% shareholder in a foreign corporation, you have a requirement to file 5471. Failure to do so can carry very stiff penalties. http://www.taxesforexpats.com/we-help/small-business-owners.html

Requirements:

• have not filed one or more required international information returns,
• have reasonable cause for not timely filing the information returns,
• are not under a civil examination or a criminal investigation by the IRS, and have not already been contacted by the IRS about the delinquent information returns

7) How will IRS inform me about my Streamlined Procedure filing?

IRS no longer sends the Streamlined Program acceptance letters (they have done so in the past). So, the best news you can have is not hearing anything from them.

8) I just found out that I need to file US taxes and want to get up to date. Should I contact the IRS beforehand and let them know I will be sending in my forms soon?

Do NOT contact the IRS in any sort of pre-emptive move. In the very odd case that they get in contact with you, let them know that you are working on compliance with us. Our usual turnaround is generally faster than any deadline they'll impose on you, anyway.

The best first contact to make is a completed tax return.

9) If my tax liability exceeds $1,500 for any of the three years, am I still eligible for the Streamlined Procedure?

In a word - Yes.

The $1,500 per year tax limit is no longer a risk factor.

I mailed my return to the IRS some time ago but have not received any word from them. How long do they usually take to respond in the case of Streamlined Procedure and back taxes?

Processing of Streamlined Procedure submission normally takes between 90 to 120 days. You may, however, experience delays due to the IRS perennial high backlog.

• If you owed tax and sent full payment with the returns, then you will receive an additional bill for interest penalties if they were not included with the original payment. This is a good sign indicating that returns were processed.

If you did not owe tax - you will not hear from the IRS. The IRS does not send letters with the confirmation of acceptance. If you don't hear from the IRS for 3 months - this is also a good sign that your application was accepted, and your tax account is now in good standing.