Form 14654 (IRS)
Form 14654: The IRS Form 14654 Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures is a very important certification form used with the streamlined domestic offshore procedures. Unlike its foreign counterpart Form 14653, the 14654 form requires the applicant to prepare a penalty computation, which is used in lieu of all the other offshore penalties the IRS can go after a taxpayer for.
The Form 14654 is deceivingly complex. Depending on the nature of the offshore submission, the number of accounts, and which potential assets maybe excluded or exempted, preparing the 14654 form can become a time-consuming undertaking. In addition, since the Internal Revenue Service has taken an aggressive position towards foreign accounts compliance, and offshore penalties are generally on the rise, it is important for the submission to be as timely and accurate as possible.
The form 14654 can be broken down into various subsections:
Initial Certification Statement
The IRS certification form begins with an introduction/certification:
“I am providing amended income tax returns, including all required information returns, for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed.
I previously filed original tax returns for these years. The tax and interest I owe for each year are as follows”
This is merely an acknowledgment by the taxpayer that they missed some income in their original returns. It also presumes that the original returns were filed (which is not required for the Form 14653)
Next the Taxpayer must provide a summary of the taxes due, including:
- Tax Year
- Amount of Tax Due
The assets refer to the assets of the Taxpayer that are subject to the 5% penalty.
Noting, that some assets, such as personal Real Estate investments are not included. Meanwhile other assets such as the Canadian RRSP is included on the FBAR and Form 8938 but NOT computed as part of the penalty.
We have prepared our own summary and example of Title 26 Miscellaneous Offshore Penalty calculation.
5% Penalty Limitation
The IRS offers a single year 5% penalty in lieu of all the other FBAR, FATCA and other offshore penalties that a Taxpayer may be subject to.
“In consideration of the Internal Revenue Service’s agreement not to assert other penalties with respect to my failure to report foreign financial assets as required on FBARs or Forms 8938 or my failure to report income from foreign financial assets, I consent to the immediate assessment and collection of a Title 26 miscellaneous offshore penalty for the most recent of the three tax years for which I am providing amended income tax returns.
I waive all defenses against and restrictions on the assessment and collection of the miscellaneous offshore penalty, including any defense based on the expiration of the period of limitations on assessment or collection.
I waive the right to seek a refund or abatement of the miscellaneous offshore penalty.
I agree to retain all records (including, but not limited to, account statements) related to my assets subject to the 5% miscellaneous offshore penalty until six years from the date of this certification.
I also agree to retain all records related to my income and assets during the period covered by my amended income tax returns until three years from the date of this certification. Upon request, I agree to provide all such records to the Internal Revenue Service.
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 Domestic 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 of willfulness, fraud, or criminal conduct, it may open an examination or investigation that could lead to civil fraud penalties, FBAR penalties, information return penalties, or even referral to Criminal Investigation.”
Taxpayer’s Written Certification Statement
The IRS requires the Taxpayer to submit his or her own statement under penalty of perjury. This is the most important part of the submission.
As provided by the IRS:
You must provide specific facts on this form or on a signed attachment explaining your failure to report all income, pay all tax, and submit all required information returns, including FBARs.
Any submission that does not contain a narrative statement of facts will be considered incomplete and will not qualify for the streamlined penalty relief.
Specific Reasons in Support of Form 14654
We have prepared nearly 1000 Streamlined Submission since the program was introduced in 2014. Do not be misled by inexperienced counsel.
The form is much more complicated than first meets the eye AND it must be signed under penalty of perjury.
As further provided by the IRS:
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.
We Specialize in Streamlined & Offshore Voluntary Disclosure
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20-years experience, and the entire matter (tax and legal) is handled by our team, in-house.
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Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Our lead attorney is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
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How to Hire Experienced Offshore Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
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