If you have lived abroad in the past, you may have unfiled U.S. tax returns as well as Reports of Foreign Bank and Financial accounts (FBARs) that have not been disclosed. This income must be included in yearly taxes, but if you weren’t aware this was the case, you may be granted tax amnesty to avoid penalties and criminal persecution via Streamlined Domestic Offshore Procedures.
Streamlined Filing Compliance Procedures were first introduced in 2012 but were updated and expanded in 2014. To find out more about new regulations, you can review the IRS FAQ page for Streamlined Domestic Offshore Procedures (SDOP). This article will provide basic information on what you need to know.
Taxpayers looking to comply with Streamlined Domestic Offshore Procedures (SDOP) will need to submit the following documentation:
· Amended filed returns and international information returns for the last three years.
· A delinquent or amended FBAR from the past six years.
· A certified statement asserting that failure to report foreign income was non-willful.
To be eligible to submit an Offshore Voluntary Disclosure, the following must apply:
· You must be a U.S. resident.
· You must have filed timely tax returns for the past three years.
· You have failed to report and pay taxes on a foreign asset or FBAR in the past.
· The failure to report was non-willful.
To be eligible, a taxpayer must be non-willful in their failure to report taxes meaning they had to have been unaware that filing was a requirement. If they were willful, and knew the requirement applied but did not report their income, they will not be provided tax amnesty and they will be facing a penalty equal to 5% of the highest value of their foreign assets.
Even if a taxpayer meets eligibility requirements, there are certain circumstances that may disqualify them. These include the following:
Currently Under Investigation: individuals will not be eligible for Streamlined Domestic Offshore Procedures if they are being audited by the IRS regardless of whether the audit is in relation to their foreign assets. They will also be disqualified if they are under criminal investigation.
Have Unfiled Returns: Amended returns will be accepted for Streamlined Domestic Offshore Procedures but original returns will not. You will not qualify if you file original returns and immediately amend them. This will be taken as a sign that you knowingly filed false returns and you may be facing penalties.
Filing for Streamlined Offshore Procedures can be a complex process. An attorney will see to it that you stay on the right side of the law and do not face criminal persecution. They will also make sure you don’t end up paying more than you owe.
Frost Law has extensive experience with a wide range of legal issues including tax controversy. We will make sure that all actions taken during the disclosure process are aboveboard and that you pay what you owe, no more and no less. Call us at 410-497-5947 or fill out our quick contact form for your free initial consultation to get the reliable representation you need.