- 1 Streamlined Filing Procedures Summary
- 2 You Cannot be Willful & Enter Streamlined Procedure Submissions
- 3 Full Submission is Required
- 4 Categorize the Accounts/Assets for the Streamlined Submission
- 5 Determine and Categorize Unreported Foreign Income
- 6 Assess whether Foreign Taxes have been Paid or Withheld
- 7 Does the Taxpayer Qualify for the Foreign Earned Income Exclusion
- 8 Are Any Assets are Exempted from Reporting for the Streamlined Procedures
- 9 Prepare the Amended Returns & FBAR
- 10 Write, Re-Write the Streamlined Procedures Certification Statement (and then Again)
- 11 Streamlined Procedure Submissions Are Time-Intensive
- 12 International Tax Lawyers Represent Clients Worldwide
Streamlined Filing Procedures Summary
Streamlined Procedures Summarized in 10 Easy Steps: When International Tax Attorneys refer to the Streamline Procedures, they are referring to the Streamlined Filing Compliance Procedures – which can be broken down even further into the Streamline Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. Oftentimes, Streamlined Submission can be much more complicated than meets the eye. Our international tax law specialist team has handled thousands of offshore disclosures — and wanted to provide a quick summary of the IRS Streamline Procedures for US Persons who may be considering doing it on their own — or even if you are not doing it on your own and want to have a general idea of what the streamlined procedures are — this is for you:
You Cannot be Willful & Enter Streamlined Procedure Submissions
There is no bright line test to determine willfulness versus non-willfulness. Rather, Taxpayers must look at the totality of the circumstance to determine whether or not they are willful or non-willful. If a Taxpayer is willful, then they do not qualify for the streamline procedures — even if the amount of unreported income is small.
Full Submission is Required
Sometimes, taxpayers only want to report the foreign accounts, assets and investments they think the IRS may be able to find. But, in order to enter the Streamlined Program — it must be a full disclosure. Of course, if the Taxpayer has an old dormant zero balance account they might have forgotten about — that is not going to negate the application — but only making a partial disclosure is a bad strategy.
Categorize the Accounts/Assets for the Streamlined Submission
Taxpayer should review the different types of accounts they have, and categorize them accordingly — since different accounts have different reporting requirements. Some accounts may be reported on the FBAR, some on the FBAR and Form 8938 — and others may require Form 8621.
Determine and Categorize Unreported Foreign Income
Taxpayer should determine how much unreported income they have, so they can get an idea of how much tax liability they may have. Since different types of income may be taxed at different rates — it is important to determine a rough estimate of the tax liability.
Assess whether Foreign Taxes have been Paid or Withheld
When a taxpayer has already paid foreign taxes abroad, they may qualify for a foreign tax credit to reduce or eliminate any US tax liability as part of their streamlined procedures submission.
Does the Taxpayer Qualify for the Foreign Earned Income Exclusion
If the Taxpayer works overseas, and qualifies under either the Bona-Fide Residence Test or the Physical Presence Test — they make qualify to exclude a significant amount of earning come from the US taxes. (The income is still reported on the tax return, but it is excluded using Form 2555).
Are Any Assets are Exempted from Reporting for the Streamlined Procedures
Not all foreign assets and accounts are subject to a penalty. Therefore, it is important that the taxpayer removed any foreign assets or accounts that should not be calculated as part the penalty (under SDOP).
Prepare the Amended Returns & FBAR
For many taxpayers who are unfamiliar with tax preparation, this is the part of the streamlined submission that overwhelms them — and causes them to throw in the towel. Therefore, the taxpayer should do a dry-run of their tax returns to determine whether they think the product is something they want to pursue on their own or not.
Write, Re-Write the Streamlined Procedures Certification Statement (and then Again)
The Streamlined Certification statement is crucial. It Is the most important aspect of a streamlined submission and taxpayer should be very careful in how they prepare the letter. There are many pitfalls and concerns to be aware of, and the Taxpayer has to be very careful not inadvertently acknowledge willfulness — either directly or indirectly — as part of the non-willful certification statement.
Streamlined Procedure Submissions Are Time-Intensive
The streamlined procedures are a great way for non-willful taxpayers to safely get into compliance. The procedures are much more complicated than meets the eye, and often times will benefit the taxpayer to have full representation with a Board-Certified Tax Specialist team.
International Tax Lawyers Represent Clients Worldwide
Our International Tax Lawyer team specializes exclusively in international tax, and specifically IRS offshore disclosure and the Streamlined Procedures.
Contact our firm for assistance.