Once a person realizes that he or she is out of IRS tax compliance for failing to properly report their foreign income, accounts, investments, or other specified assets to the United States, their best chance to avoid potential fines and penalties is to get back into compliance by submitting to one of the IRS Offshore Disclosure Programs.
For a majority of individuals, their failure to report was non-willful – a.k.a., unintentional/accidental/non-deliberate, and therefore they qualify for the Streamlined Offshore Disclosure Program.
Streamlined Offshore Disclosure
The Streamlined Program is a relatively safe, easy, and effective method for getting into tax compliance for unreported/undisclosed foreign money. There are two types of programs: the Streamlined Foreign Offshore Procedures and Streamlined Domestic Offshore Procedures.
Both programs are nearly the same, and both programs require the applicant to be non-willful. The difference is, if a person qualifies as a foreign resident than the 5% penalty is waived.
The test for meeting the Streamlined Foreign Offshore Residence requirement is tough — it requires an individual to have lived outside of the United States for at least 330 days in any one of the last three tax years and/or not meet the Substantial Presence Test in at least one of the last three tax years.
As such it is not uncommon that one spouse meets the foreign residence test and the other spouse does not.
Dual Streamlined Offshore Applications
When one spouse meets the foreign residence test, but the other spouse does not, then generally the spouse who meets the foreign residence test will submit under the streamlined foreign program — and the other spouse will submit to the streamlined domestic program.
There are various administrative headaches when preparing applications this way, but as an international tax law firm that limits its entire practice to offshore disclosure- we may be of assistance.
For the spouse that resides overseas and meets the foreign resident status, his or her assets should be excluded in accordance with meeting the streamlined foreign requirements. For the spouse that resides in the United States, or at least not outside the United States for at least 330 days, their assets would be penalized the 5%.
If the spouses have joint accounts than they will need to prove which money belongs to which spouse in order to identify what assets or accounts are subject to the penalty, and which ones are not.
Unreported Foreign Income or Accounts
At Golding and Golding, we limit our entire law practice to offshore disclosure. Many times, clients come to us when they realize they have not reported or disclosed foreign gifts, income accounts, investments, etc.
Golding & Golding, A PLC
We have successfully represented clients in more than 1,000 streamlined and voluntary offshore disclosure submissions nationwide and in over 70-different countries. We have represented thousands of individuals and businesses with international tax problems.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe.
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