Voluntary Offshore Compliance Programs for U.S. Taxpayers

Whether living in the U.S. or abroad, U.S. citizens, permanent residents and Expats are required to file a U.S. income tax return to report world-wide income. Furthermore, the value of and information on non-U.S. financial assets must be reported. Failure to pay U.S. income tax liabilities and file the proper forms may result in civil and/or criminal penalties.

While reporting of non-U.S. income and assets is not a new requirement, it is one area in which many taxpayers, especially Expats, lack knowledge and compliance. To enforce the reporting of this information by U.S. taxpayers, the U.S. works bilaterally with over 100 countries to identify financial assets and accounts held in those countries by U.S. taxpayers, essentially leaving no country in which to shelter money from tax and reporting.

The IRS offers several programs for U.S. taxpayers to voluntarily come into compliance with income tax, Foreign Bank Account Reports (FBARs) and foreign disclosure reporting. Through these programs, the potentially harsh penalties related to incomplete or non-filings are reduced. If you were a nonresident alien who became a U.S. resident in the last six (6) years, these programs may benefit you, as well.

What voluntary compliance programs are available?

There is a program for U.S. resident taxpayers (Streamlined Domestic Procedures) and one for non-resident U.S. taxpayers (Streamlined Foreign Procedures) for taxpayers who need to become compliant with their U.S. income tax filings.

Key provisions of the Streamlined Procedures

• File individual tax returns together with all required information returns for the 3 most recent years of non-compliance.
• File FBARs for the 6 most recent years of non-compliance.
• Pay an Offshore Asset Penalty of 5% under Streamlined Domestic or 0% under Foreign Streamlined.
• Avoids most, if not all, failure-to-file, failure-to pay and accuracy-related penalties.
• Attest to non-willful conduct in the failure to disclose.

There are other programs for U.S. taxpayers who are compliant with U.S. income tax filings but who have not filed the FBAR, foreign financial disclosures and/or information returns.

Key provisions of the Delinquent FBAR & International Information Submission Procedures

• Have previously reported on U.S. tax returns and paid all tax on the accounts reported on the delinquent FBARs.
• Have not filed one or more international information returns.
• Cannot not be under a civil examination or a criminal investigation by the IRS.
• Have not already been contacted by the IRS about the delinquency.
• Include a statement of all facts establishing reasonable cause for the failure to file.

Key provisions of the Relief Procedures for U.S. citizens who expatriate after March 18, 2010

• Must be a U.S. citizen.
• File individual tax returns together with all required information returns for the 5 most recent years of non-compliance and the current year of expatriation. This includes the Foreign Bank Account Reports (FBARs).
• Have expatriated after March 18, 2010 or intend to relinquish U.S. citizenship.
• Have a net worth of less than $2 million (at the time of expatriation and at the time of making their submission under these procedures).
• Have an aggregate tax liability of $25,000 or less for the taxable year of expatriation and the five prior years.
• Avoids liability for any unpaid taxes and penalties for these years or any previous years.
• Attest to non-willful conduct in the failure to disclose.

The Non-Willful or Reasonable Cause Statement

With regard to determining non-willful conduct or reasonable cause, Kerkering Barberio’s position is that the taxpayer needs an experienced attorney who specializes in IRS compliance such as these programs to guide this part of the process. We can refer you to attorneys with this experience. The attorney and our International Tax Group will work together to assist you throughout the engagement.

Whether the filing is for the Expat living abroad or the U.S citizen or permanent resident living in the U.S., the voluntary compliance filings are complex and require a knowledgeable tax professional. Each taxpayer situation is unique and needs to be reviewed on its own. Doing this requires well-versed professionals. Our International Tax Group at Kerkering, Barberio & Co. has been assisting taxpayers with offshore compliance filings for more than a decade. If you have questions on the Streamlined Program or reporting of non-U.S. income and financial assets, please contact Phoebe Trumpler at  or call us at 941-365-4617.