IRS Amnesty Programs
The IRS over the last decade has become very aggressive in the international tax area. This is very evident in the recent cases involving US citizens holding Swiss bank accounts and not disclosing their existence on Form 114 (formerly Form 90-22.1), Report of Foreign Bank and Financial Accounts (FBARs). The IRS prosecuted many taxpayers for not disclosing and reporting these accounts and many were fined and are facing additional prosecution. Although the original amnesty program (Offshore Voluntary Disclosure Programs 2009 & 2011-ODVP) for the FBARs has expired, it is still a very good idea to file the FBARS even if late. Once again, the IRS expects voluntary compliance and penalizes those taxpayers who fail to file tax returns.
The Offshore Voluntary Disclosure Program was launched in 2012 and was the successor to prior voluntary programs offered in 2011 and 2009. It was further modified on June 18, 2014. This Program ended on September 28, 2018.
Streamlined Compliance Program
In response to comments made by the tax community, the IRS launched a new streamlined compliance procedure for non-resident US taxpayers on June 26, 2012. Referred to as the Streamlined Compliance Procedure, this program was designed to assist those taxpayers that really did not fit the OVDP programs due to the non-willful nature of their non-compliance. These procedures were implemented in recognition that some U.S. taxpayers living abroad failed to timely file U.S. federal income tax returns or Reports of Foreign Bank and Financial Accounts (FBARs), but have recently become aware of their filing obligations and now seek to come into compliance with the law. These new procedures were for non-resident citizens/green-card holders including, but not limited to, dual citizens who had not filed U.S. income tax and information returns.
The streamlined procedure require taxpayers to file the past three and to file delinquent FBARs for the past six years. All taxes and interest are required to be submitted with the delinquent tax returns. If the tax due on any year was greater than $1,500, the taxpayer’s acceptance in the Streamlined Compliance Program was at risk. Further, the taxpayer was required to complete a 3 page Questionnaire to further determine eligibility for the Program.
As further explained in the June 18, 2014 IRS News Release, few but very significant changes were made to this Program as follows:
- All Taxpayers (resident or not resident in the US) Are Eligible
- Completion of Questionnaire No Longer Required
- $1,500 tax thresh hold removed