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June 20, 2014

IRS Update: Streamlined Foreign Offshore Procedure

On June 18th, 2014, the Internal Revenue Service (IRS) announced easier ways for US  taxpayers to become compliant with their tax obligations. IRS Commissioner, John Koskinen believes the changes open a new pathway for people with offshore assets to come into tax compliance. Koskinen adds to this by saying “We have made important adjustments to provide opportunities for all US taxpayers to come in, including those who 
are not willfully hiding assets.” 
The changes modify streamlined procedures to assist a wider group of US taxpayers who have unreported foreign bank and financial accounts (FBARs) and/or delinquent tax returns. Up until June 18th, 2014 the original streamlined procedures required 3 years of delinquent tax returns, 6 years of FBARs penalty free, and a detailed questionnaire, which depending on your answers, could disallow entrance into the streamlined program. If disqualified from the streamlined program the only other viable option was to enter into the Offshore Voluntary Disclosure Program that requires 8 years of tax returns and FBARs and included possible penalties of 27.5% on foreign financial accounts. 
The streamlined program questionnaire was problematic since the applicant was typically disallowed entrance into US tax compliance if: 
1. They resided in the US for any period of time since January 1st, 2009. 
2. They had filed a US tax return in 2009 or later year. 
3. They owed more than $1,500 of US tax in any of the 3 years they are filing. 
The elimination of the streamlined program questionnaire provides for a more direct and easy path into filing late US tax returns and FBARs. 
At Manning Elliott we typically see concerned clients who are US citizens residing in Canada. Often the obstacle in entering into the streamlined program was answering yes to one of the three questions above. Now that the streamlined program questionnaire has been eliminated, entrance into a penalty free streamlined program is easier than ever. The new program for US taxpayers residing outside of the US is called ‘Streamlined Foreign 
Offshore Procedure’. 
For more information on the Streamlined Foreign Offshore Procedure and how it may benefit you, please contact Manning Elliott’s US tax team for 
further assistance or have any questions as to how to proceed.