The IRS recently made additional changes to the Streamlined Domestic Offshore Procedures to make it easier for U.S. individual taxpayers to come into compliance with international income reporting. Like other iterations of the program, these changes are designed for individuals whose failure to comply with the regulations was non-willful. The streamlined procedures and penalties apply specifically to situations where the individual failed to report income on his U.S. tax return. The IRS has offered different procedures for the failure to file a disclosure form which does not result in a failure to report income. The streamlined procedures are summarized by Barnes Dennig below.
Eligibility requirements for U.S. Residents
- Must be a U.S. citizen or resident under the U.S. tax law
- Previously filed a U.S. tax return for each of the three most recent years
- Failed to report gross income from a foreign financial asset and to pay tax
- Failures must result from non-willful conduct
To come into compliance under these procedures, an eligible taxpayer is required to:
- File delinquent or amended tax returns with all other required information returns for the most recent three years for which the due date has passed;
- File any delinquent FBARs for the most recent six years for which the FBAR due date has passed; and
- Pay the full amount of the taxes, interest and, where applicable, the 5% miscellaneous offshore penalty.
Taxpayers who participate in the program and comply with all requirements will not be subject to several standard penalties, including the failure to file and failure to pay penalties, accuracy penalties, information return penalties and FBAR penalties. In addition, the IRS has stated that if returns filed under these procedures are selected for an audit, no additional penalties will be assessed absent a finding of willful noncompliance.
The IRS now has several avenues through which a taxpayer can come into compliance with foreign income reporting. Before making any decisions, it’s important to speak with a tax advisor to review your options. For additional information please contact Barnes Dennig at 513-241-8313, or click here to contact us. We look forward to speaking with you soon.