IRS Streamlined 5% Penalty Calculation
If you are considering entering the IRS Streamlined Program, then it is important that you understand how to calculate the penalties.
The IRS Streamlined for U.S Persons,. 5% Penalty is based on the highest year-end balance of certain unreported FBAR and FATCA assets that fall within the compliance period.
Golding & Golding have prepared a sample calculation for preparing the Certification Form 14454 5% streamlined filing compliance procedure penalty works.
2019 IRS Streamlined Procedures for U.S. Residents
If you are seeking more general information about the Streamlined Program (there is no penalty for the Streamlined Foreign Program).
Golding & Golding Example of Streamlined 5% Penalty
Golding & Golding developed the following summary example.
The Streamlined Program requires the applicant to amend and pay outstanding tax liability for the last three (3) years, to include unreported foreign income and unreported foreign accounts, assets & investments that were not previously reported on a U.S Tax Return.
*We have not authorized any other law firm to use the example.
Form 14654 Penalty Example How to Calculate Practice Pointer
Step 1: Evaluate your Accounts & Assets There are many different accounts and assets that may be included in the computation. Two of the most common are assets and accounts involving FATCA (Foreign Account Tax Compliance Act) and FBAR (Report of Foreign Bank and Financial Account Form) *Some assets and accounts may be excluded from the penalty-base. Be sure your foreign assets and accounts are not excluded from the penalty base
Step 2: Compile 12/31 Year-End Balances Compile the 12/31 balances on your Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts for each year within the compliance period. The use of the December 31st helps avoid double-counting
Step 3: Select an annual exchange rate Determine the proper exchange rate for each year. There are various exchange rates you can use, such as the IRS exchange rates and Department of Treasury exchange rates. Practice Pointer: Stay consistent with the source of exchange rates you used.
Step 4: Aggregate the 12/31 balances Total the 12/31 balances on your previously unreported Foreign Accounts, Insurance Policies and other 8938/FBAR qualified accounts (Value of Real Estate is not included for the Streamlined Program). Be sure to only include accounts and assets that comprise the penalty base.
Step 5: Select the highest 12/31 aggregate balance Pick the one-year that has the highest 12/31 balance (not highest max year balance, which is the standard for Traditional Voluntary Disclosure). The 5% Penalty is not on every year -- just the highest year.
Step 6: Multiply the aggregate balance by 5% Example: Michael's highest year 12/31 aggregate balance in the six (6) year compliance period is 2017. In 2017 his 12/31 balances totaled $2,600,000. His penalty would be $130,000. Multiple by .05 -- not .50
Streamlined Penalty Avoidance
Here is a brief list of the penalties:
|IRS Forms||What is the Purpose of the Form||Golding & Golding IRS Penalty Resource|
|FBAR (FinCEN 114)||Penalties Range: Civil FBAR, Non-Willful FBAR, Willful FBAR, Criminal FBAR||FBAR Penalties|
|Form 3520||Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts:||3520 Penalties|
|Form 3520-A||Annual Information Return of Foreign Trust With a U.S. Owner||3520-A Penalties|
|Form 5471||Information Return of U.S. Persons With Respect to Certain Foreign Corporations||Form 5471 Penalties|
|Form 5472||Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business||Form 5472 Penalties|
Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund
|Form 8621 Penalties|
|Form 8938||Statement of Specified Foreign Financial Assets||Form 8938 Penalties|
|Form 8865||Return of U.S. Persons With Respect to Certain Foreign Partnership||Form 8865 Penalties|
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Offshore Counsel
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in IRS Voluntary Disclosure?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in IRS Offshore and Voluntary Disclosure. Contact our firm today for assistance with getting compliant.