In a previous article, I discussed the eligibility requirements and the general process of the Streamlined Foreign Offshore Procedures. In this article, I would like to explore further the specific filing requirements that should be met under the Streamlined Foreign Offshore Procedures. As a side note, while this article contains an overview of filing instructions, it greatly simplifies the matter and glosses over the potential complexities that may arise in an inividual case. This is why only an international tax attorney should be handling the preparation and submission of documents in a voluntary disclosure context – I strongly discourage any “self-representation” in the Streamlined Foreign Offshore Procedures due to the complexity of the issues involved.
It is useful to organized the filing requirements based on relevant categories of documents. There are five categories of documents that may need to be filed under the Streamlined Foreign Offshore Procedures: tax returns, tax payment, FBARs, Certification, and late Deferral and ITIN Requests.
Streamlined Foreign Offshore Procedures: Filing Requirement Related to U.S. Tax Returns
The IRS issued precise instructions regarding submitting U.S. tax returns under the Streamlined Foreign Offshore Procedures. There are two possible scenarios with respect to submitted U.S. tax returns under Streamlined Foreign Offshore Procedures.
First, assuming that the taxpayer never filed a tax return, for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, the taxpayer must submit a complete and accurate delinquent tax return using Form 1040, U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed on time.
However, if a U.S. tax return has been filed previously, then the taxpayer must submit a complete and accurate amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return, together with the required information returns (e.g., Forms 3520, 5471, and 8938) even if these information returns would normally be filed separately from the Form 1040 had the taxpayer filed a complete and accurate original return.
Irrespective of whether this is a delinquent tax return or an amended tax return, the taxpayer should include at the top of the first page of each delinquent or amended tax return and at the top of each information return “Streamlined Foreign Offshore” written in red to indicate that the returns are being submitted under these procedures. The IRS warns that this is critical to ensure that the taxpayer’s returns are processed through Streamlined Foreign Offshore Procedures.
Streamlined Foreign Offshore Procedures: Payment of Tax Due
Together with the U.S. tax returns, the taxpayer should submit the payment of all tax due as reflected on the tax returns and all applicable statutory interest with respect to each of the late payment amounts. The taxpayer’s taxpayer identification number must be included on your check. As mentioned previously, under the Streamlined Foreign Offshore Procedures, the taxpayer is not required to pay any failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
Streamlined Foreign Offshore Procedures: FBARs
Unlike the 2014 OVDP, the Streamlined Foreign Offshore Procedures follow the general FBAR statute of limitations and require the taxpayer to file delinquent FBARs for each of the most recent 6 years for which the FBAR due date has passed. The FBARs should be filed according to the FBAR instructions and they should include a statement explaining that the FBARs are being filed as part of the Streamlined Filing Compliance Procedures.
All FBARs must be e-filed at FinCen. On the cover page of the electronic form, select “Other” as the reason for filing late. An explanation box will appear. In the explanation box, enter “Streamlined Filing Compliance Procedures.” While not required, it may be beneficial to include a more expanded statement to briefly state the circumstances – it is the job of an international tax attorney to critically look at his client’s case and see if this is the right strategy.
Streamlined Foreign Offshore Procedures: Certification of Non-Willfulness
This is the most critical part of the voluntary disclosure package under the Streamlined Foreign Offshore Procedures. The taxpayer must complete and sign a statement on the Certification by U.S. Person Residing Outside of the U.S. certifying (1) that he is eligible for the Streamlined Foreign Offshore Procedures; (2) that all required FBARs have now been filed; and (3) that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from non-willful conduct.
The taxpayer must submit the original signed statement to the IRS. Furthermore, he must also attach copies of the statement to each tax return and information return being submitted through Streamlined Foreign Offshore Procedures.
The IRS warns that failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of the Streamlined Foreign Offshore Procedures.
At this point, the IRS does not require the attachment of copies of the Certification statement to FBARs, but this may change in the future (it appears that the FBARs may acquire at some future time the capability of submitting an attached pdf statement).
Streamlined Foreign Offshore Procedures: Late Deferral and ITIN Requests
Where relevant, the taxpayer may also utilize the Streamlined Foreign Offshore Procedures to make retroactive elections that otherwise would be late as well as to make ITIN requests.
If the taxpayer is not eligible to have a Social Security Number and does not already have an ITIN, he should submit an application for an ITIN along with the required tax returns, information returns, and other documents filed under these streamlined procedures.
In situations where the taxpayer seeks relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, he should submit the following items as part of his disclosure package under the Streamlined Foreign Offshore Procedures:
a). A statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
b). A dated statement signed by you under penalties of perjury describing: (i) the events that led to the failure to make the election; (ii) the events that led to the discovery of the failure, and (iii)
if the taxpayer relied on a professional advisor, the nature of the advisor’s engagement and responsibilities; and
c). For relevant Canadian plans, a Form 8891 for each tax year and each plan and a description of the type of plan covered by the submission.
Streamlined Foreign Offshore Procedures: Mailing Address as of July 7, 2014
Once the above-described documents are gathered into one package (together with the payments), this package should be sent in paper format to the following address:
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741
This address may only be used for returns filed under these procedures and may change over time; so, an international tax lawyer should verify any changes to the address prior to submission of any documents under the Streamlined Foreign Offshore Procedures.
Contact Sherayzen Law Office for Help with Disclosure of Your Foreign Accounts and Other Assets
If you own foreign financial accounts and other assets, you should contact Mr. Eugene Sherayzen, an experienced tax attorney of Sherayzen Law Office for legal help. Our experienced international tax law firm specializes in offshore voluntary disclosures and we can help you.