Form 14653: The Form 14653 Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, is a very important IRS certification form used with the streamlined foreign offshore procedures (SFOP). With SFOP, the taxpayer submits a non-willful certification form and escapes the entire title 26 miscellaneous offshore penalty — so a lot is riding on the certification form. The form is a part of the streamlined filing procedures.
Unlike its foreign counterpart Form 14654, the 14653 form does not require the applicant to prepare a penalty computation. In the Form 14654, the penalty computation is used to calculate offshore penalties — which is used in lieu of all the other offshore penalties the IRS can go after a taxpayer for stemming from FBAR and other noncompliance.
With Form 14653, all penalties are waived.
Summary of the 14653 Certification Form
While the form 14653 does not require complex penalty calculations or analysis, it does require a certification that the writing is being made under penalty of perjury. Some unethical and inexperienced attorneys try to mislead applicants about this nature of the Form and the important of not violating the perjury statute.
Perjury is a crime, punishable by jail or prison. That is not to scare you, but to ensure you understand the seriousness of the submission process.
Let’s take a look at the Form 14653 to provide some more insight on how a U.S. Person Residing Outside of the United States completes the form.
Top Section: Personal Information (Form 14653)
The top part of the form is relatively simple, and asks only for identifying information:
- ITIN/Social Security Number
- Telephone Number
- Mailing Address
- State Zip Code
Taxes Due (3 Years for Form 14653)
The next section is relatively straight forward (at least as to the Taxpayer). It requires information regarding the tax that are due:
- Amount of Taxes Due
Interest is actually “estimated” interest, since the exact total amount of interest is not known at the time of submission (varies based on the IRS processing timelines.)
What is the Taxpayer Certifying on an IRS Form 14653?
The Certification portion short but packed with information. Some of the highlights, include:
- My failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. I understand that non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”
- I acknowledge the possibility that amended income tax returns I am submitting under the Streamlined Foreign Offshore Procedures may report income for tax years beyond the three-year assessment limitations period under I.R.C. § 6501(a).
- Other assessment limitations periods in I.R.C. § 6501 may allow the Internal Revenue Service to assess and collect tax. If I seek a refund for any tax or interest paid for the omitted income that I am reporting on my amended income tax returns because I feel that my payments were made
- beyond the assessment limitations period, I understand that I will forfeit the favorable terms of the Streamlined Procedures. I recognize that if the Internal Revenue Service receives or discovers evidence.
IRC 6501 (Limitations on Assessment & Enforcement)
The IRS enforcement statute varies from 3-to-6-years, unless civil fraud is involved.
- (a) General rule Except as otherwise provided in this section, the amount of any tax imposed by this title shall be assessed within 3 years after the return was filed (whether or not such return was filed on or after the date prescribed) or, if the tax is payable by stamp, at any time after such tax became due and before the expiration of 3 years after the date on which any part of such tax was paid, and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period.
- For purposes of this chapter, the term “return” means the return required to be filed by the taxpayer (and does not include a return of any person from whom the taxpayer has received an item of income, gain, loss, deduction, or credit).
- (e) Substantial omission of items: Except as otherwise provided in subsection (c)—
- Income taxes: In the case of any tax imposed by subtitle A— (A)General ruleIf the taxpayer omits from gross income an amount properly includible therein and— (i) such amount is in excess of 25 percent of the amount of gross income stated in the return, or (ii)such amount—
- (I)is attributable to one or more assets with respect to which information is required to be reported under section 6038D (or would be so required if such section were applied without regard to the dollar threshold specified in subsection
- (a) thereof and without regard to any exceptions provided pursuant to subsection (h)(1) thereof), and (II) is in excess of $5,000, the tax may be assessed, or a proceeding in court for collection of such tax may be begun without assessment, at any time within 6 years after the return was filed.
In other words, if there is more than $5,000 of unreported income from foreign assets, listed in 6038D, the statute jumps up to 6-years.
U.S. Citizens and Legal Permanent Residents & Form 14653
To qualify as a foreign resident (and avoid the penalty), U.S. Citizens and Legal Permanent Residents have a march steeper hill to climb than there non-resident counterparts.
- For the covered tax period, indicate whether you were physically outside the United States for each year. You must have been physically outside the U.S. for at least 330 full days in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, and you must not have had a U.S. abode. For more information on the meaning of “abode” see IRS Publication 54.
Non-U.S. Citizen and Non Legal Permanent Resident
For non-residents, they must show that for at least one of the most recent three years, the non-resident did not meet the Substantial Presence Test.
- If you are not a U.S. citizen or a lawful permanent resident, please attach to this certification your computation showing that you did not meet the substantial presence test under I.R.C. sec. 7701(b)(3).
- Your computation must disclose the number of days you were present in the U.S. for the three years included in your Streamlined Foreign Offshore Procedures submission and the previous two years.
- If you do not attach a complete computation showing that you did not meet the substantial presence test, your submission will be considered incomplete and your submission will not qualify for the Streamlined Foreign Offshore Procedures.
Personal Certification Statement
The personal statement is a very important aspect of the submission.
The IRS requires that Taxpayer to:
- Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts.
- Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs.
- Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it.
- And explain your contacts with the account/asset including withdrawals, deposits, and investment/ management decisions.
- Provide a complete story about your foreign financial account/asset. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice.
- If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts. The field below will automatically expand to accommodate your statement of facts.
Tips for Writing the Form 14653 Certification Personal Statement
Here are some common tips to help you complete the form:
Applicants Must be Non-Willful
If you are willful, you do not qualify for the streamlined program and should try to craft a certification of non-willfulness statement. If you willful, then your only option for formalized offshore disclosure is the traditional VDP.
Remember, willfulness includes:
The certification statement asks for significant facts to substantiate your non-willfulness — but you are not tasked with writing a novel (no matter how good or interesting your story is). Typically, you should be able to integrate all of the necessary information for your non-willful certification within a page or so.
Each person’s facts and circumstances are different, but typically no circumstance requires a 10-page summary.
Be Clear and Concise
The IRS agents are overworked and underpaid. If you could find a way to say the same sentence using seven words instead of 15 words, then you should do it. You should do your best to write — and rewrite — the statement as many times as necessary to get it to its most concise point – while still including all of the necessary information.
If you are submitting your statement after writing it on your first go-round, you should reconsider, and possibly rewrite the statement a few more times before submitting.
Always Play Nice with the Agents
The IRS agents are only doing their job; they do not have it out for you. Whether you want to believe that or not, we’ve been doing this for many years, and we can tell you most agents are not gunning for top position.
They have a job to do, and they have certain protocols for accepting or rejecting a submission. There is no need to be rude to the agents. Be respectful and you will find that being respectful will go a long way (no matter how much you have a distaste for the IRS or the U.S. Government in general)
Double-Check the Form Instructions Before Submitting
The IRS periodically updates the program requirements, and updates the version of the forms. It is important that you have met all the necessary requirements, both substantively and administratively — so that your submission does not get kick-backed unnecessarily.
The IRS is a government agency and not the most well-oiled machine. We have had situations where the IRS will send our client a bill asking for payment of the penalty, even after we have submitted the penalty and the IRS accepted and deposited the check.
In other words, do your best to follow all directions but realize even if you do the IRS may follow-up with issues which you know you have already resolved and handled (and even in these situations, you should try to be respectful – no matter how hard it may be)
Signing Under Penalty of Perjury
The applicant will certify as follows:
- “Under penalties of perjury, I declare that I have examined this certification and all accompanying schedules and statements, and to the best of my knowledge and belief, they are true, correct, and complete.”
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