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The streamlined foreign offshore procedures

| Apr 6, 2021 | FBAR & FATCA (Foreign Accounts), Internal Revenue Service

What are the streamlined foreign offshore procedures?

They are a lot of U.S. residents and non-residents who are not aware that they are required to make tax returns for their offshore accounts. By the time they realize this, most of them are late. The Streamlined Foreign Offshore Procedure is a program initiated by the Internal Revenue Service (IRS) with an effort to bring foreign residents into compliance for their unreported foreign assets, accounts, income and investments. The procedure is provided to taxpayers who can certify that their failure to report foreign accounts and pay all income tax was not a result of willful conduct. The program provides taxpayers in such situation with;

  • A procedure for resolving and filing amended or delinquent returns.
  • Terms for resolving their penalty and tax obligations.

What are the significant changes made to streamlined foreign offshore procedures?

The Streamlined Filing Procedure was created in 2012, but several restrictions excluded many ex-pats from its eligibility. Luckily, most of these restrictions have been lifted, enabling more taxpayers to participate in the program. Below are the changes.

  • Extension of eligibility to U.S. taxpayers living in the United States. Initially, eligibility was limited only to those ex-pats living outside the U.S.
  • Removal of the $1,500 threshold.
  • Elimination of the risk assessment process. The 2012 program required one to be deemed low-risk by the IRS to qualify.
  • The waiving of all FBAR and late filing penalties for the taxpayers.

Who is eligible for the streamlined foreign offshore procedures?

The procedure is eligible for U.S. individual taxpayers living outside the country and U.S. individual taxpayers living in the United States. Those eligible for the procedure must meet the following requirements;

  • Must meet the applicable non-residency requirements; the person must be a U.S. citizen or Green Card Holder and have resided outside the U.S. for at least 330 days in any of the last three years.
  • Have failed to pay tax, failed to file an FBAR or report the income from foreign financial assets non-willful.
  • No IRS-initiated civil examination of a tax return for the year in question.
  • Must have a valid Taxpayer Identification Number.

Those who had previously filed delinquent or amended returns to address the situation can participate. The IRS will, however, not subside the previous penalty assessments.

What are the requirements during the streamlined foreign offshore procedure submission?

  • Tax returns. One must file original or amended tax returns for the past three years, including the offshore account, assets, investments and income.
  • FBAR report. You must file FBAR Reports (FinCEN 114) for six years, including all foreign accounts information.
  • International Informational Returns. The taxpayer must file international information returns that include; Forms 3520, 3520-A, 5471, 5472, 8621, 8865 and form 8938.
  • Certification Form 14653. The form indicates that you are eligible for the procedure, that all the needed FBARs have been filed and that the failure to file tax returns resulted from non-willingly conduct.

Before making any statements or affirmative representations to the IRS, it is vital to talk to an attorney for legal assistance. Most people fear that they might go to jail after seeing an attorney, which is not true as the consultations are done confidentially and discreetly.

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