The IRS has extended the scope of its Streamlined Filing Compliance Procedures to include US Citizens and Permanent Residents living in the US. These procedures aim at bringing into compliance those who have failed to report income from foreign financial assets and paid taxes as required by US law. Taxpayers can avoid huge penalties and possible jail terms by paying back taxes due and the Title 26 penalty, which is 5% of the highest aggregate value/balance of taxpayer’s foreign financial assets. Talk to your tax professional to see if you must pay this penalty.
To qualify for these procedures you must:
- Reside in the US (for joint filers one or both spouses must reside in the US)
- Have filed previous three years’ tax returns and;
- Have failed to report income from foreign financial assets and pay taxes according to US law
- Might have failed to file required FBAR statements or other international information returns
If you qualify for these procedures you will have to amend the most recent three years’ tax returns to report income foreign financial assets. Taxpayers will also need to file any informational returns that might be required such as FATCA forms. Filing FBAR statements for the most recent 6 years is also required.
Once everything is ready mail the returns with a statement called “Certification by a US person residing in the US.” In this statement you will certify that:
- You are eligible for streamlined domestic offshore procedures
- All required FBAR statements have been filed
- Failure to file returns, report all income and pay taxes resulted from non-willful conduct
- Miscellaneous offshore penalty is accurate
You will send your tax payments for those three years that result from reporting foreign financial income and the penalty along with your filing. Remember to keep copies of supporting documents and be prepared to provide them upon request from the IRS.
