- 1 Are Streamlined Submissions Litigated in Court?
- 2 Is It a Court Case?
- 3 Is It Criminal; Is There a Trial?
- 4 Are the Streamlined Procedures Binding?
- 5 Can I Litigate the Outcome if I Dispute the Penalty?
- 6 What If I Am Rejected from the Streamlined Program?
- 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
Are Streamlined Submissions Litigated in Court?
When it comes to disclosing unreported foreign accounts, assets, investments, and income — one of the most common methods for getting into compliance for taxpayers who are non-willful is through the Streamlined Filing Compliance Procedures. There are two types of streamlined submissions: Streamlined Domestic Offshore Procedures and Streamlined Foreign Offshore Procedures. At Golding and Golding, our international tax lawyers specialize exclusively in offshore compliance disclosure and amnesty. Our Board-Certified Tax Law Specialist team has handled thousands of streamlined submissions successfully. Unfortunately, lately, we are finding that many taxpayers we speak to have been misled about the nature of a streamlined submission and how the process works. Here are five (5) important factors to consider about a Streamlined Submission:
Is It a Court Case?
No, submitting to the Streamlined Procedures is not equivalent to filing a court case with the IRS. It is a civil agreement between the taxpayer and the IRS to minimize penalties for undisclosed foreign money in exchange for submitting missed international reporting forms such as FBAR, Form 8938, Form 3520, and Form 5471.
Is It Criminal; Is There a Trial?
The Streamlined Procedures are not criminal submissions. It is a civil matter only. And, since there is no court case, there is no trial. In other words, by submitting to the Streamlined Procedures, you are not entering into a lawsuit or litigation with the IRS. Even if you are audited or under examination, these are civil matters with the IRS and not actual litigation in court.
Are the Streamlined Procedures Binding?
Yes and no. When a person enters into an agreement with the Internal Revenue Service under the Streamlined Procedures, they are making an agreement with the IRS to pay the penalty in order to try to avoid other penalties. As recent litigation has shown, the Streamlined Procedures do not provide a binding agreement with the IRS that they have to presume you are non-willful, if they believe you are willful. Likewise, it is not a binding agreement that the IRS cannot audit you after you submit — because they specifically reserve this right in the certification form:
“I recognize that if the Internal Revenue Service receives or discovers evidence of willfulness, fraud, or criminal conduct, it may open an examination or investigation that could lead to civil fraud penalties, FBAR penalties, information return penalties, or even referral to Criminal Investigation.”
Can I Litigate the Outcome if I Dispute the Penalty?
If a taxpayer submits to the Streamlined Procedures and is accepted into the program, they cannot sue the IRS for a refund or abatement of the penalty.
As provided by the streamlined certification Form:
“I waive the right to seek a refund or abatement of the miscellaneous offshore penalty.”
What If I Am Rejected from the Streamlined Program?
If you are rejected from the Streamlined Procedures, chances are you will hear from the IRS — either asking you to resubmit your application or notifying you that you are under audit. This is rare and generally only happens when the IRS believes you are willful. The process of dealing with the Internal Revenue Service is not a litigation or court case matter. If you challenge the IRS and lose at all the different IRS/Appeals levels (audit, appeal, reconsideration, CDP, etc.) and want to take your chances in suing the IRS, you should then find a Board-Certified Tax Lawyer in your area that specializes exclusively in tax litigation (not offshore disclosure and compliance). This type of litigation is separate from your Streamlined Submission. There are lawyers who specialize exclusively in tax litigation aka ‘tax litigation lawyers’ who litigate against the IRS regularly.
Current Year vs Prior Year Non-Compliance
Once a taxpayer 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.