Streamlined offshore compliance procedures updated

By Sally P. Schreiber, J.D.

Changes apply to taxpayers whose violations are nonwillful.

The IRS updated its streamlined offshore compliance procedures and issued new frequently asked questions (FAQs) with regard to the procedures. The streamlined offshore compliance procedures are for taxpayers whose failure to comply with requirements to report offshore assets is nonwillful and are designed to allow these taxpayers to become tax-compliant with reduced or no penalties. There are separate procedures for taxpayers residing in the United States (found at tinyurl.com/lgmg7ez) and taxpayers residing outside the United States (found at tinyurl.com/m2vow47).

Among the clarifications made by the FAQs are:

  • The 5% miscellaneous offshore penalty for nonwillful violations is not intended to apply to foreign financial assets in which the taxpayer has no personal financial interest or only a partial interest (e.g., accounts over which the taxpayer had only signature authority).
  • Any asset (tax-compliant or noncompliant) that was not reportable on either FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR), or Form 8938, Statement of Specified Foreign Financial Assets, is not included in the penalty base for the streamlined domestic offshore procedures.
  • Nonresidency for purposes of the streamlined foreign offshore procedures is defined in those procedures and not in Sec. 911 and its regulations.

The FAQs on the streamlined filing compliance procedures for U.S. taxpayers residing in the United States can be found at tinyurl.com/kuqsuh3, and the FAQs on the streamlined filing compliance procedures for U.S. taxpayers residing outside the United States can be found at tinyurl.com/l37qs9s.

By Sally P. Schreiber, J.D., a JofA senior editor.

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