What's the difference between the OVDP and the Streamlined Procedure?
The IRS offers two programs for taxpayers who are currently non-compliant: the Offshore Voluntary Disclosure Program (OVDP) and the Streamlined Procedure (SP). Most attorneys recommend the OVDP, while tax preparers favor the SP. We believe that most clients are significantly better off using the Streamlined Procedure.
The OVDP, which requires the assistance of a lawyer, represents a considerable expense. It involves filing eight years of tax returns, paying tax and penalties due for all years, paying FBAR civil penalties, and paying your lawyer's fee. In other words, it's much better for the attorney involved than for the client.
The Streamlined Procedure, on the other hand, only involves filing three years of returns and six years of FBARs. Most importantly, the fees are automatically waived. The overall cost to the client is also significantly less. (The price of an attorney alone for the OVDP starts at $10,000, and that's on top of tax preparation fees.)
The only time we recommend the OVDP is when the IRS has already started a civil investigation. In such cases, the OVDP keeps the resulting penalties at bay.
Can I switch to the Streamlined Procedure after being accepted into the OVDP?
The short answer is yes.
Suppose you qualify for the Streamlined Procedure but have been accepted into the Offshore Voluntary Disclosure Program before September 1, 2012. In that case, you may opt-out of the Offshore Voluntary Disclosure Program and request the Streamlined Procedure.
To opt-out, you’ll need to inform the examiner of your decision in writing. You’ll receive a letter confirming this is an irreversible choice. The examiner assigned to your case will then be able to make a risk determination for your submission and close your case through the Streamlined Procedure. If all items required for the voluntary disclosure program have already been submitted to the IRS, you will not be required to resubmit for the Streamlined Procedure.
Can I declare non-U.S. accounts via a Streamlined Procedure if I live in the U.S.?
If failure to declare the Non-U.S. financial accounts is your only omission, you may qualify for the Delinquent Financial Reports Procedure.
Unlike the Streamlined Foreign Offshore Procedure, this program does not include non-residency requirements yet still provides amnesty from FBAR penalties. To qualify for this procedure, you must be up-to-date with your other tax reporting obligations.
If you are not up-to-date with U.S. tax reporting (if you have unreported income, unfiled informational returns, etc.), then we can recommend other solutions for you. Contact us, and we’ll examine your situation, walk you through the pros and cons of all your options, and help you put together a plan.
Which years should I file for if I’m using a Streamlined Procedure?
The Streamlined Foreign Offshore Procedures require three tax returns + 6 FBARs.
The program stipulates that you must file the three most recent delinquent tax returns, including extensions. When writing (June 16, 2022), you should file returns for 2019, 2020, and 2021.
Why not 2020, 2021, and 2022? Because your 2022 tax return is not yet overdue. Assuming the program does not change, the 2022 return will become overdue (for those abroad) on June 15, 2023.
The IRS has also issued guidance on how to file extensions for those who are behind on their returns.
*Source - IRS.
When are FBARs due?
The due date for FBAR return is April 15 of the following calendar year. So, the due date for 2021 FBAR is April 15, 2022. However, the Treasury is granting an automatic 6-month extension for FBAR, making the new due October 15, 2022.
I’m unable to open the Streamlined Procedure Questionnaire Form 14653
The source of this problem lies with the IRS. The current form is intended to be opened using the latest version of Adobe Reader - Acrobat Reader DC, which means you can't view it inside your browser.
Please, follow the steps described in this article.
Form 8891 has been discontinued
You don't need to file Form 8891 anymore.
The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present. It is still referenced in the Streamlined Procedures instructions, but it is no longer necessary.
Streamlined Procedure Mailing Instructions
Streamlined Procedure (SP) forms must be mailed to the IRS and require a wet signature
The Streamlined Procedures require the taxpayer's wet signature (a physical signature, the forms may NOT be signed electronically). The documents must also be submitted to the IRS by mail; Streamlined Procedure forms may NOT be e-filed.
Printing Your Federal Return and Certification Letter
We recommend that you print your entire federal tax return (single-sided; the IRS does not indicate paper size, so either US letter or European A4 size is acceptable) and enclose all pages from the printed PDF file (including those marked "For Your Records").
Why should you include pages marked "or your records?" These pages are worksheets that may help the IRS to understand how you calculated some of the figures on your return. There's certainly no harm in adding them in.
You should also print three copies of the certification letter.
Print Only the FBAR acknowledgments, Do Not Print the Actual FBARs
Your package should also include your FBAR acknowledgments for each filing year.
Please omit the actual FBARs; they have already been received by the Treasury, which is why you've received an acknowledgment.
Example of acknowledgment page:
Signatures and Headers
The first page of each Form 1040 should have a red header reading "STREAMLINED FOREIGN OFFSHORE." If your printer does not print in red ink, that's fine; we add it in for emphasis. You can also write it in by hand if it's missing.
Sign and date the bottom of page 2 of each Form 1040. (If you are filing a joint return, both spouses must sign.)
Sign page 3 of each certification letter. (If you are filing a joint return, both spouses must sign.)
Do not include state returns or federal returns which are not part of the Streamlined Procedure
Only include exactly what is required for the Streamlined Procedure: generally, three years' worth of tax returns and FBARs. If you are also filing a state tax return, or are filing for additional tax years not included in the Streamlined Procedures, do not include these items in your package to the IRS.
Assembling your printed package
Your completed package should contain the following:
Three signed and dated Federal Tax Returns, each with the Streamlined Foreign Offshore Header on page 1 (assuming you're applying to this program).
Three signed and dated Certification letters. Each Certification Letter should be stapled or paper-clipped to a Form 1040.
Your FBAR Acknowledgement pages (which show which FBARs you've submitted and that the Treasury has received them).
Mail the entire application package to the address below. Do NOT use the "signature required" option if you use a private courier company (such as UPS or FedEx).
Internal Revenue Service 3651 South I-H 35 Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741
Internal Revenue Service 3651 South I-H 35 Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741 |
Unfortunately, the IRS does not acknowledge receipt of tax returns. If you want to check the status of your submission, you can obtain this information through the dedicated line for international taxpayers: +1-267-941-1099. Please do not call to check your return rate any earlier than 60 days after sending the SP package to the IRS. |
I have not filed for more than five years. What are my options now?
The best thing to do now is to file your taxes via the Streamlined Procedure. It was explicitly created for taxpayers who have lapsed in filing their taxes - and only requires you to file three years of tax returns and six years of FBAR.
The best part is that it eliminates all late filing/payment penalties.
Which years should I file for if I’m using a Streamlined Procedure?
The Streamlined Foreign Offshore Procedures require three tax returns + 6 FBARs.
The program stipulates that you must file the three most recent delinquent tax returns, including extensions. When writing (June 16th, 2022), you should file returns for 2019, 2020, and 2021.
Why not 2020, 2021, and 2022? Because your 2022 tax return is not yet overdue. Assuming the program does not change, the 2022 return will become overdue (for those abroad) on June 15th, 2023.
The IRS has also issued guidance on how to file extensions for those who are behind on their returns.
*Source - IRS.
When are FBARs due?
The due date for FBAR return is April 15th of the following calendar year. So, the due date for 2021 FBARs is April 15th, 2022. However, the Treasury is granting an automatic 6-month extension for FBARs, making the new due date October 15th, 2022.