“IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance” – How Will These Changes Affect USCs and LPRs Living Outside the U.S.?

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A few hours ago, the IRS made a significant announcement, which was expected after IRS Commissioner Koskinen’s remarks earlier in the month.  See, IRS Commissioner’s Comments – Is He Listening to USCs and LPRs Living Around the World!?

The complete announcement can be read here – IR -2014-73, June 18, 2014 –

IRS Makes Changes to Offshore Programs; Revisions Ease Burden and Help More Taxpayers Come into Compliance

I will take time to reflect upon these policy changes at the IRS.  More posts will follow.  They appear to be significant.  The consequences to taxpayers, including USCs and LPRs residing overseas, will be significant.

One of the more important parts of the announcement to USCs and LPRs living outside the U.S. is set out below:

“Through our enforcement efforts and implementation of FATCA, taxpayers are more aware of their obligations, and we believe want to come into compliance,” Koskinen said. “In this rapidly changing environment, we listened to feedback from the tax community as well as the National Taxpayer Advocate about our voluntary programs. We have made important adjustments to provide opportunities for all U.S. taxpayers to come in, including those who are not willfully hiding assets.”

Streamlined Procedures Expanded

The changes announced today make key expansions in the streamlined procedures to accommodate a wider group of U.S. taxpayers who have unreported foreign financial accounts.

The original streamlined procedures announced in 2012 were available only to non-resident, non-filers. Taxpayer submissions were subject to different degrees of review based on the amount of the tax due and the taxpayer’s response to a “risk” questionnaire.

The expanded streamlined procedures are available to a wider population of U.S. taxpayers living outside the country and, for the first time, to certain U.S. taxpayers residing in the United States. The changes include:

  • Eliminating a requirement that the taxpayer have $1,500 or less of unpaid tax per year; 
  • Eliminating the required risk questionnaire;
  • Requiring the taxpayer to certify that previous failures to comply were due to non-willful conduct.

For eligible U.S. taxpayers residing outside the United States, all penalties will be waived. For eligible U.S. taxpayers residing in the United States, the only penalty will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue.

For some comments on the “streamlined” approach, see earlier post –Why the so-called “Streamlined” Process is “Much Ado About Nothing” – Legally Speaking, Posted on May 2, 2014

More posts to follow on this IRS announcement.

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