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Streamlined Offshore Compliance Procedures Available to Assist Non-Willful Taxpayers in California and Across the U.S.

Streamlined Offshore Compliance Procedures Available to Assist Non-Willful Taxpayers in California and Across the U.S.

New streamlined filing compliance procedures designed to encourage United States taxpayers to comply with their foreign tax reporting requirements were recently announced by the Internal Revenue Service (IRS). The new procedures allow an American taxpayer with certain interests in an offshore bank or other financial account to file amended or overlooked federal income tax returns reflecting those assets while facing waived or reduced financial penalties. As part of the streamlined procedures, eligible individuals who reside outside of the U.S. borders will not be required to pay a penalty. Taxpayers who live within the nation will be penalized at a rate of five percent of the highest value of the foreign asset.


Although taxpayers who utilize the streamlined reporting procedures will generally not be prosecuted criminally, each individual is required to certify that his or her prior failure to disclose the offshore assets was non-willful. A taxpayer who lies about his or her willfulness may be subject to penalties of perjury. Non-willful conduct under the streamlined disclosure program refers to a mistake, misunderstanding, or inadvertence. In addition to this certification requirement, Americans who use the streamlined procedures are obligated to disclose specific reasons for their previous failure to comply with the requirements of the tax code. Unfortunately, it may be difficult to convince the IRS that a taxpayer’s behavior was in fact non-willful.


In some situations, the IRS may attribute willful blindness to a taxpayer who intentionally avoids learning about his or her offshore asset reporting requirements. For example, when the IRS considers whether an individual’s failure to timely file the Report of Foreign Bank and Financial Accounts (FBAR) was willful, the agency examines evidence related to the taxpayer’s intentional violation of a legal duty that was known to him or her at the time. In such cases, the IRS bears the burden of establishing willfulness. Still, the agency is generally only required to demonstrate that a taxpayer was aware of the reporting requirement and did not file the FBAR in order to prevail. If a taxpayer simply failed to inquire about his or her reporting duties, the IRS may consider the individual willfully blind. Similarly, the agency has apparently questioned the non-willfulness of some would-be streamlined procedure taxpayers who simply failed to disclose a foreign financial asset to an accountant or other person preparing taxes.



The new streamlined compliance procedures for overseas financial assets can be hard to navigate on your own. If you have questions about a complex tax scenario, you should discuss your situation with a seasoned tax lawyer. Attorney William Hartsock is a certified tax law specialist with decades of experience helping clients in Southern California navigate international tax matters. To speak with a knowledgeable tax lawyer about your circumstances, do not hesitate to call Mr. Hartsock at (858) 481-4844 or contact him through his website.


Additional Resources:

Am I Non-Willful Under The OVDP Streamlined Procedures?, by Charles Rettig, Forbes



Photo Credit: penywise, stock.xchng

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