Penalty Free Program for Overseas Americans Delinquent on Tax Returns
In 2014 the IRS expanded the terms of the program that allows overseas Americans to file overdue US tax returns. This program was originally announced in 2012; it allowed delinquent taxpayers living abroad an opportunity to avoid the penalties and fees by coming into compliance. 2014 changes made the already popular program even better - resulting in over 48,000 taxpayers using it.
Most importantly, the program has broadened eligibility criteria and eliminated all penalties related to late filing / late payments.
Additionally, the program may be used for filing amended returns to claim retroactive relief on qualified foreign pension plans eligible for tax deferral.
Current years are 2015-2017 (Tax Returns) + 2012-2017 FBARs
To be eligible for the program It doesn’t matter what your income level is or how long you haven’t filed — this program allows you to start with a clean slate with amnesty from penalties. The increased scope of this program has opened the door to come into compliance without fear of penalties.
The regular price for Streamlined Procedure services if purchased separately:
|3 Years of Federal Tax Returns||350 * 3 = $1,050|
|6 Years of FBARs||75 * 6 = $450|
|Analysis of situation and applicability for the program||$125|
|Preparation of the IRS Certification by U.S. Person Residing Outside of the U.S statement for the Streamlined Procedure costs||$300|
|Preparation of the IRS Certification by U.S. Person Residing in the U.S statement for the Streamlined Procedure costs||$500|
Same percent discount applies if your income is over $100,000 — the package then costs $1,400.
If your bank requires proof of US tax compliance, we can also prepare and mail them the U.S. Paid Preparer Certification and Notification. This service costs $150.
Do NOT contact the IRS in any sort of pre-emptive move. In the very odd case that they get in contact with you, let them know that you are working on compliance with us. Our usual turnaround is generally faster than any deadline they'll impose on you, anyway.
The best first contact to make is a completed tax return.
The problem lies on the IRS side. The current form http://www.irs.gov/pub/irs-pdf/f14438.pdf is intended to be opened in the latest version of Adobe Reader (you can't view it inside your browser).
In many cases not meeting all conditions for the Streamlined Foreign Offshore Procedure (i.e. having been previously contacted by the IRS) - is not a reason not to apply. There is no downside to applying for the Streamlined Foreign Offshore Procedure. If your application is rejected you will not be granted a waiver of penalties. However, you still can establish the Statute of Limitations. And - you do not give up the opportunity to get waiver of penalties if the IRS determines the facts presented on the Certification Letter satisfactory to prove the non-voluntary nature of tax delinquency.
If you happen to have factors that cross out any chance to be accepted into the program (i.e. not meeting the non-residency qualification test) - then we will help you file outside of the procedure under the same scope of filing years. As opposed to the Streamlined Procedure you will not automatically get amnesty from FBAR penalties - however, in most cases IRS does no apply penalties as long as you file voluntarily and provided full disclosure of your financial situation.
In a word - Yes.
The $1,500 per year tax limit is no longer a risk factor.
Short answer - Yes.
If you qualify for the Streamlined Procedure but have been accepted into one of the offshore voluntary disclosure programs prior to September 1, 2012, you may opt out of the offshore voluntary disclosure program and request the Streamlined Procedure.
To opt out, you need to inform the examiner of your decision in writing. This is an irrevocable election and you will receive a notification letter confirming this. The examiner assigned to your case will then be able to make a risk determination of your submission and close your case according to the Streamlined Procedure. If all submission items for the voluntary disclosure program have already been submitted to the IRS, you will not be required to make a second submission for the Streamlined Procedures.
Processing of Streamlined Procedure submission normally takes between 90 to 120 days. You may, however, experience delays due to the IRS perennial high backlog.
You can check the status of your IRS tax account online: http://www.irs.gov/Individuals/Order-a-Transcript.
Most state tax departments also offer this option. For example, if you filed a NY state return you can create account at http://www.tax.ny.gov/online and check your account status there.
IRS no longer sends the Streamlined Program acceptance letters (they have done so in the past). So the best news you can have is not hearing anything from them.
If IRS needs additional documentation, the request will arrive approximately within 2 months after your filing.
IRS has two programs for taxpayers who are currently non-compliant with tax returns and FBARs - Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Procedure (SP). Most attorneys will recommend the OVDP while tax practitioners to favor the SP. We believe that most clients are significantly better served by the Streamlined Procedure.
OVDP - which does require a lawyer's assistance, means a huge expense for the client. It involves filing 8 years of tax returns, paying tax and penalties due for all years, paying FBAR civil penalties, and paying lawyer fees for OVDP assistance. In other words - it's a much better deal for the attorney involved than the client.
Streamlined Procedure, on the other hand, only involved filing 3 years of returns and 6 years of FBARs. Most importantly - the fees are automatically waived. The cost involved is also significantly cheaper (attorney cost alone for OVDP starts at $10,000 - on top of the tax preparation fees).
The only occasion where OVDP is preferred, is when the IRS has already started a civil investigation. In such case OVDP serves to keep the consequent penalties at bay.
The US treasury requires that US Citizens/GC Holders remain current and compliant with FBAR requirements for the last 6 years. Your filing option depends on whether you had non-reported interest from foreign bank accounts and whether you are subject to additional reporting requirements.
If you are at least a 10% shareholder in a foreign corporation, you have a requirement to file 5471. Failure to do so can carry very stiff penalties. http://www.taxesforexpats.com/we-help/small-business-owners.html
Pricing - in addition to fee for form 5471 (see below)
|Foreign Corporation Form 5471|
|Form 5471 base price||$500|
|Additional U.S. shareholders (TFX clients) reported on same form||$50|
|Subpart F income calculation||$200|
|Second form 5471 for related company||50% discount|
|Dormant Corporation |
(meaning there was no activity during the year).
Please note that there are no 'almost-dormant' corporations (just like one can not be almost pregnant). Any business activity occurring during the year would make it non-dormant and require preparation of a complete Form 5471.
|Final 5471 with distribution of previously untaxed income||$1000|