Tax-Expatriation

IRS Releases Clarifying rules for U.S. Citizens Living Outside the U.S. – Re: Streamlined Filing Guidance

Posted on October 14, 2014

In June of this year, the IRS announced a new administrative method by which taxpayers can file late or never filed tax returns and information returns.  See, The Risks to USCs and LPRs – Filing Late U.S. Income Tax Returns via the so-called “Streamlined” process

I previously posted a note about the so-called “Streamlined” process the IRS  [which are now gone and removed from the IRS website] had announced in June 2012, Why the so-called “Streamlined” Process is “Much Ado About Nothing” – Legally Speaking.  I explained that legally speaking, there is no legal protection to the taxpayer provided by this administrative procedure.

The IRS again just announced further clarifications to this program and just released on the IRS website a description of the streamlined filing compliance procedures (“SFCP”) for U.S. taxpayers residing abroad and related “FAQs”.   These FAQs can be reviewed here:  Specific Instructions for the Streamlined Foreign Offshore Procedures

FAQs are all the rage these days with the IRS, as the government does not take the time or spend the resources to follow the Administrative Procedures Act or similar requirements which are required in order to issue binding rules and regulations. See a previous post regarding these requirements, specifically regarding those who renounce U.S. citizenship or abandon LPR status and have not complied with IRS Notice 2009-85.  See,Does IRS Notice 2009-85 regarding expatriation have the “force of law”? Posted on April 14, 2014

Hence, these SFCP are not legally binding on the IRS and they can pick cases as they choose for audit, review and penalty assessment in any manner they think is consistent with the law. Sometimes they do it in a manner that is not consistent with the law.

Of course, most practitioners do not think the IRS will “willy-nilly” ignore their own FAQs procedures for taxpayers who file under the SFCP (at least not across the board); lest taxpayers lose confidence in the IRS.

At the end of the day, any particular U.S. taxpayer residing overseas, should understand carefully these legal implications of the SFCP before “jumping in the pan”; which is hopefully not a “frying pan”.