Are you in compliance with the IRS reporting obligations? The Streamlined Procedures might be the right solution for you!
If you are a U.S. citizen or a permanent resident of the U.S. (a “taxpayer”), you may already know that you will be subject to tax on your worldwide income. However, in addition to being subject to worldwide taxation, taxpayers also have reporting obligations with the IRS with regards to certain foreign assets.
A good number of taxpayers living abroad might be under the impression that since they are not living in the U.S. and that since they are paying taxes in another country, that they owe no taxes in the U.S., and as a result there is no need to file tax returns with the IRS. Nothing could be further from the truth.
While it is true that a taxpayer may be entitled to receive a foreign tax credit for any taxes paid abroad, that will not eliminate the obligation to report foreign bank accounts and foreign assets to the IRS. In addition to any potential tax due, the US imposes its taxpayers with hefty penalties for failure to disclose foreign bank accounts and foreign assets.
Taxpayers that are out of compliance with the IRS may qualify for the Streamlined Filing Compliance Procedures (the “Streamlined Procedures”), a program specifically designed to bring taxpayers with unreported foreign income, assets, accounts or investments into compliance with the IRS.
The Streamlined Procedures is a voluntary disclosure program available to taxpayers certifying under penalties of perjury that their failure to comply with applicable requirements was attributable to non-willful conduct. Taxpayers residing in the U.S. will be subject to a miscellaneous penalty equal to five percent (5%) of the foreign financial assets that gave rise to the tax compliance issue. There is no miscellaneous penalty for taxpayers living abroad.
The Streamlined Procedures is divided into separate programs, one for taxpayers residing in the U.S. called the Streamlined Domestic Offshore Procedures, and one for those taxpayers residing outside the U.S. called the Streamlined Foreign Offshore Procedures. Taxpayers will not be eligible to use the Streamlined Procedures if the IRS has initiated a civil examination for any taxable year.