- 1 5 Streamlined Offshore Errors to Avoid for Unreported Accounts
- 2 (Knowingly) Moving Overseas to Become a Foreign Resident
- 3 Trying to Submit More Than 3 Years of Tax Returns
- 4 Failing to Pay the Penalty Amount
- 5 Being Litigious in the Certification Form
- 6 Not Being Fully Compliant
- 7 Current Year vs Prior Year Non-Compliance
- 8 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 9 Golding & Golding: About Our International Tax Law Firm
5 Streamlined Offshore Errors to Avoid for Unreported Accounts
Back in 2019, we first authored a very popular article about some of the more common offshore account compliance procedure mistakes taxpayers made. We received numerous inquiries from taxpayers who approached us because the IRS rejected their application or they were unhappy with their current representation. Fast forward to 2023 and the Streamlined Procedures have become quite popular. Unfortunately, we are now finding that not only are the same mistakes happening, but new avoidable mistakes are happening as well. Let’s take a look at five more common streamlined mistakes you should try to avoid:
(Knowingly) Moving Overseas to Become a Foreign Resident
The Streamlined Foreign Offshore Procedures is preferred to the Streamline Domestic Offshore Procedures because under the Streamlined Foreign Offshore Procedures, taxpayers do not have to pay the 5% Title 26 Miscellaneous Offshore Penalty and they can file original tax returns. To qualify for the program, there are very strict foreign residency rules. And, if a taxpayer intentionally moves overseas in order to try to qualify as a foreign resident, this may get them into more trouble.
Because for that year or so that the Taxpayer lives overseas, waiting to qualify as a Foreign Resident, they are aware of their noncompliance – which can take a non-willful submission and turn it into a potential willfulness scenario. This can then lead to a rejection or denial of a streamlined application and possibly worse, if the IRS believes it was fraudulent.
Trying to Submit More Than 3 Years of Tax Returns
With the Streamlined Procedures, the IRS expects to receive three amended or original tax returns (depending on which program is applied). While in years past, some taxpayers may have submitted more than three years of returns, in recent years the IRS has been cracking down on taxpayers using this strategy.
Failing to Pay the Penalty Amount
If a taxpayer submits to the Streamlined Procedures and receives their certification letter affirming that everything has been processed, but they have not paid the penalty and do not pay the penalty in the future, their submission is not considered complete. As a result, this mistake may lead to the Taxpayer being denied final approval into the program.
Being Litigious in the Certification Form
Submitting to the Streamlined Procedures is not equivalent to filing a lawsuit or going to court. There is nothing litigious about entering the Streamlined Filing Compliance Procedures. Your certification statement should not be adversarial or disrespectful, as that will get you nowhere. The statement should be persuasive and concise.
Not Being Fully Compliant
In order to submit to the Streamlined Procedures, you have to be fully compliant with the IRS. You have to make sure that you submit all of your unreported foreign accounts, assets, investments, and income. In other words, you cannot make a partial submission.
Current Year vs Prior Year Non-Compliance
Once a taxpayer has missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.