IRS Amnesty Programs

/ Expat Tax, US Tax

An Amnesty Program provides qualifying taxpayers with an opportunity to avoid penalties and fees by coming into compliance. Typically, such programs require delinquent taxpayers to pay back an agreed lump sum which, once paid, forgives certain tax liabilities accrued from previous tax periods. Over the years the IRS has introduced a number of programs for taxpayers who might not have been aware of their filing obligations; namely OVDP and Streamlined Filing Compliance Procedures

OVDP Closure

Since it’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs, paying back a total of $11.1 billion in back taxes, interest and penalties. In September 2018, the IRS officially closed the Offshore Voluntary Disclosure Program. The closure of this program reflects the advances in reporting and increased awareness of offshore tax and reporting responsibilities for U.S. taxpayers. 

Streamlined Procedure Program

Designed for only individual taxpayers, including estates of individual taxpayers, Streamlined Filing Compliance Procedures are currently still available to U.S. individual taxpayers residing inside and outside of the United States. First offered in September 2012, they have since been expanded and modified to accommodate a broader group of taxpayers. Major changes include but are not limited to: 

  • extension of eligibility to U.S. taxpayers residing in the United States
  • elimination of the $1,500 tax threshold
  • elimination of the risk assessment process associated with the streamlined filing compliance procedure announced in 2012

Streamlined Foreign & Domestic Offshore Procedures

Streamlined filing compliance procedures are available to taxpayers certifying that their failure to report financial assets and pay tax due did not result from willful conduct on their part. The eligibility requirements for both non-U.S. and U.S. residents is as follows: 

Taxpayers must certify that their conduct was not willful
The IRS define non-willful conduct as conduct that is due to negligence, inadvertance, mistake or, conduct that is the result of a good faith misunderstanding of the requirements of the law. 

IRS has initiated a civil examination of taxpayer’s returns for any taxable year
A taxpayer who has been subject to a civil examination of their returns or, is under criminal investigation by the IRS Criminal Investigation is not eligible to use streamlined procedures.

Taxpayers eligible to use streamlined procedures who have previously filed delinquent or amended returns must pay previous penalty assessments
Taxpayers who have previously filed delinquent or amended returns with respect to foreign financial assets outside of the Offshore Voluntary Disclosure Program or predecessor programs (a.k.a “quiet disclosures”) may use streamlined filing. It’s important to note that any penalty assessments previously made with respect to those filings will not be abated. 

Taxpayers who want to participate in the streamlined procedures need a valid Taxpayer Identification Number
All returns submitted must have a valid Taxpayer Identification Number. For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid Social Security Number (SSN). Tax returns for individuals not eligible for a SSN or ITIN will not be processed under the streamlined procedure. 

What happens after submitting under the streamlined procedures?

Tax returns submitted under the Streamline Foreign & Domestic Offshore Procedures will be processed like any other return. As such, receipt of the returns will not be acknowledged by the IRS. Whilst returns submitted under the streamlined procedures will not be subject to an IRS audit automatically, they may be selected under the existing audit processes and/or be subject to verification procedures. 

Returns submitted under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures may be subject to IRS examination, additional civil penalties, and even criminal liability, if appropriate.  

After a taxpayer has completed the streamlined filing compliance procedures, he or she will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures. 

For more information on Streamlined Filing Compliance Procedures take a look at the IRS guidelines or contact our qualified team to discuss your options.  

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