Will Streamlined Offshore Be Next to Close After DIIRSP?
With IRS Ending DIIRSP, are the Streamlined Offshore Procedures Next? If you haven’t heard (and unless you’re a tax geek you probably haven’t heard), the IRS secretly terminated DIIRSP recently. The acronym DIIRSP stands for the Delinquent International Information Return Submission Procedures. These procedures served as an alternative to the Voluntary Disclosure Program (VDP) and Streamlined Procedures.
Essentially, if a taxpayer had no unreported income and was non-willful, they could oftentimes qualify for this offshoot of Reasonable Cause, and submit late international information returns with a reasonable cause statement in order to avoid offshore penalties.
DIIRSP was an offshoot to a Reasonable Cause submission so that if the taxpayer can show reasonable cause and had no unreported income, the taxpayer was almost guaranteed a penalty waiver.
When making a Reasonable Cause submission outside of DIIRSP (which is often an alternative to the Streamlined Domestic Offshore Procedures), the taxpayer seeks a penalty waiver in lieu of the 5% title 26 miscellaneous offshore penalty. If the IRS disagrees with the reasonable cause statement, the taxpayer could still be hit with penalties.
*A reasonable cause submission can also be made after a penalty has been issued in order to secure a penalty abatement, but that is different than making a proactive submission under the delinquency procedures before penalties were issued.
Is Streamlined Going to End?
All good things must come to an end.
The Streamlined Filing Compliance Procedures are a wonderful way for non-willful taxpayers to get into compliance with minimal penalties. In fact, if the person qualifies as a Foreign Resident under the Streamlined Foreign Offshore Procedures (SFOP), they receive a complete penalty waiver. Under the domestic version of the program, the penalties are reduced to just 5%, which is still a great option.
For years, the IRS has indicated that the Streamlined Program was temporary and would not last forever.
The main unknown comes with the fact that in 2018 when the IRS closed OVDP, they gave tax practitioners and the general public six months to get into the program. With DIIRSP, the IRS just ended these procedures without giving any notice.
Essentially, the IRS just changed the web page associated with the instructions for DIIRSP and substituted them with a notice that delinquent taxpayers should pursue normal filing procedures along with a Reasonable Cause statement.
Should I Hurry Up and Submit to the Streamlined Program?
In our practice, we always educate taxpayers and explain to them that they must consider all the alternatives before proactively making a submission to the IRS. It seems the Streamlined Procedures will not last forever and if you are considering entering the Streamlined Program, you may be under a tighter time restriction than before, having seen how the the IRS just abruptly ended DIIRSP. Therefore, if you are considering the Streamline Procedure, you may want to consider submitting sooner as opposed to later.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS Offshore Compliance and Voluntary Disclosure.
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