The IRS Streamlined Program
The streamlined program is a set of procedures developed by the IRS to assist taxpayers with foreign income, assets, accounts and investments, with US tax and Foreign Bank Account Report (FBAR) compliance, if the non-compliance has been non-wilful.
Taxpayers must (under the penalty of perjury, carrying penalties criminal charges) file a statement to satisfy the IRS that their non-compliance was non-wilful. “Willfulness” can involve actual knowledge or constructive knowledge. Recent tax cases have held that constructive knowledge can involve, a taxpayer’s failure to check the “yes” box when responding to questions in their individual income tax return form as to the existence of foreign accounts.
Taxpayers who qualify for the streamlined program may:
- amend (or file) US tax returns for the last 3 years;
- disclose foreign account information for the last 6 years for Foreign Bank Account Report (FBAR) purposes; and
- be eligible to apply foreign tax credits for foreign taxes paid.
The streamlined foreign offshore procedures (SFOP) is available to US Citizens and permanents residents who have lived outside of the US for at least 330 days, over the last 3 years. In addition to the benefits listed above, taxpayers who qualify for the SFOP are also eligible for a waiver of otherwise applicable penalties.
The streamlined domestic offshore procedures (SDOP) is available to US Citizens and permanents residents who have lived outside of the US, for less than 330 days. In addition to the benefits listed above, taxpayers who qualify for the SDOP are eligible for penalty reductions, with a penalty (capped at 5%) being imposed on the highest year-end value of unreported accounts and specified assets, over the 6 year FBAR compliance period.