IRS Streamlined Compliance Process – Willful and Non-Willful Violators
NewsPosted in on January 28, 2015
The IRS Offshore Voluntary Disclosure Program (OVDP) offers taxpayers with foreign or offshore accounts who have failed to file the Report of Foreign Bank and Financial Accounts (FBAR) the opportunity to voluntarily come forward and disclose their accounts to the IRS. Under U.S. law, taxpayers holding offshore accounts are required to file the FBAR form (FinCEN Report 114) by the annual June 30th deadline.
The federal government has made offshore tax evasion a top enforcement priority and pressure on U.S. taxpayers with undisclosed offshore accounts is only expected to increase. Taxpayers who do not disclose the existence of their offshore accounts and report income derived from such accounts, face severe fines and penalties, including potential criminal prosecution.
If you voluntarily come forward and report your previously undisclosed foreign accounts to the IRS, you may be able to avoid possible criminal prosecution and qualify for reduced financial penalties. Under the voluntary disclosure program, certain taxpayers may be eligible to participate in a streamlined filing compliance process that limits the penalties for failing to file FBARs in the past. The streamlined procedures are designed to give eligible taxpayers the opportunity to file an amended or delinquent return with the IRS and resolve their tax and penalty obligations. An experienced IRS voluntary disclosure attorney can help you determine whether you may qualify for the OVDP streamlined program.
Streamlined Procedures are Only Available for Non-Willful Violators
The IRS has always limited its streamlined compliance process to non-willful filers. While the June 2014 modifications to the OVDP expand some of the program’s eligibility criteria, willful violators are still restricted from participating in the streamlined program. Recently, Forbes wrote about the classification of willful and non-willful violators seeking to take advantage of the OVDP streamlined process.
If you want to participate in the streamlined program you will have to certify under penalty of perjury that your failure to file your FBAR, report all income, and pay the taxes associated with your offshore accounts was not willful in nature. The IRS defines “non-willful” conduct as conduct that is a result of “negligence, inadvertence or mistake” or is due to a “good faith misunderstanding” of the legal filing requirements.
In addition to certifying your conduct as not willful, you must also provide specific reasons explaining why you failed to submit the required forms and report your offshore accounts to the IRS. If you relied on the advice or guidance of a professional advisor, you will have to provide a summary of the advice given along with the contact information for your advisor.
The IRS warns that “willful blindness” will not permit a taxpayer to take advantage of the streamlined tax amnesty compliance process. So, if you intentionally avoided learning about the FBAR rules and requirements, you will not be eligible to participate in the OVDP streamlined program.
Before you take any actions to participate in the streamlined process, you should consult with an attorney familiar with tax amnesty and IRS offshore voluntary disclosure programs. An IRS voluntary disclosure lawyer can help you evaluate all of your options and determine whether the streamlined program may be right for you. Contact Kevin E. Thorn, Managing Partner of Thorn Law Group, today to discuss your situation with an experienced tax law attorney. We can be reached at any of our office locations:
- Washington D.C. Office: (202) 349-4033
- New Jersey Office: (201) 842-7696
- Boston Office: (617) 692-2989
