- 1 Was Your Streamlined Disclosure Rejected?
- 2 Streamlined Certifications Are Not Adversarial
- 3 You Were Already Penalized (Before Submission)
- 4 You Did Not Pay the Streamlined Penalty
- 5 Current Year vs Prior Year Non-Compliance
- 6 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 7 Golding & Golding: About Our International Tax Law Firm
Was Your Streamlined Disclosure Rejected?
Ever since we published our first Streamlined Procedures FAQ Guide several years ago, we have been warning US Taxpayers about the potential risks of having a streamlined submission rejected. There are many reasons a streamlined submission may be rejected. It could be that the taxpayer was willful, the certification statement was inadequate, or the taxpayer did not fully participate in the disclosure. As we enter into 2023, taxpayers (who either used other law firms or tried to submit by themselves) have been approaching us with several new reasons why they have been rejected, so we thought an article update was in order. Let’s take a look at three (3) new reasons we have been seeing an uptick in rejections from these taxpayers.
Streamlined Certifications Are Not Adversarial
The non-willful certification statement is prepared on either Form 14653 (Streamlined Foreign Offshore Procedures) or Form 14654 (Streamlined Domestic Offshore Procedures). The narrative is very important and effective writing comes from many years of writing and legal experience. Drafting an effective narrative can make the difference between having a successful submission and having an application denied. Taxpayers entering into the Streamlined Programs have to concede to the fact that they will owe a 5% penalty. This can (understandably) be upsetting to taxpayers and sometimes it is reflected in their statements. This makes the statement appear less persuasive and can lead to rejection.
You Were Already Penalized (Before Submission)
In order to enter the Streamlined Procedures, you have to be non-willful and not have already been penalized (or under exam/audit). If you are already under exam or audit or have been penalized, you do not qualify for the Streamlined Procedures – no matter how persuasive your certification statement is.
You Did Not Pay the Streamlined Penalty
In order to make a successful submission, you must pay the 5% Title 26 Miscellaneous Offshore Penalty. If you do not pay the penalty, you have not completed the submission – even if the initial submission of FBAR and Tax Returns to the IRS was successful. Taxpayers wanting to submit to the Streamlined Procedures must submit the payment in order to complete the submission process.
Current Year vs Prior Year Non-Compliance
Once a taxpayer has missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist that specializes exclusively in these types of offshore disclosure matters.
Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure.
Contact our firm today for assistance.