October 27, 2016

By Ephraim Moss, Esq. & Joshua Ashman, CPA

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This past week, the IRS announced that over 100,000 taxpayers have now participated in its disclosure programs, which have been available to delinquent filers since 2009.  More specifically, according to the IRS, 55,800 taxpayers have used the Offshore Voluntary Disclosure Program (OVDP) to resolve their tax obligations, paying more than $9.9 billion in taxes, interest, and penalties, while an additional 48,000 taxpayers have used the Streamlined Procedures, paying approximately $450 million.

IRS Commissioner John Koskinen remarked on the success of the disclosure programs, stating “As we continue to receive more information on foreign accounts, people’s ability to avoid detection becomes harder and harder. The IRS continues to urge those people with international tax issues to come forward to meet their tax obligations.”


The OVDP and Streamlined Procedures programs, which serve as the two main amnesty programs, have a number of contrasting facets, including their target participant, requirements, and results, as follows:

1. Streamlined Procedures

Target Taxpayer: These procedures generally can be used if: (1) the taxpayer has failed to report income from a foreign financial asset and failed to pay the required tax, and may have failed to file a required FBAR, and (2) The taxpayer has committed the failures due to non-willful conduct.

Requirements: U.S. expats are required to delinquent file tax returns, with all required information returns, for the prior 3 years, and file any delinquent FBARs for the prior 6 years.  They must also file a non-willful certification with their submission.

Result: A taxpayer who complies with the procedures will have to pay previously unpaid taxes with interest, but will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.

Most of our expat clients entering the disclosure programs choose the IRS Streamlined Procedures due to the non-willful nature of their tax delinquency and the desire to come clean without incurring onerous penalties.  The cost-effectiveness of this program makes it a great way to get on track with your taxes and put your IRS worries behind you for good.


Target Taxpayer: The OVDP is designed for taxpayers who are concerned that their failure to report income, and failure to disclose foreign financial accounts, might be viewed by the IRS as willful and who seek to avoid potential criminal penalties.

Requirements: U.S. expats are required to file delinquent tax returns, with all required information returns, and FBARs for the prior 8 years.

Result:  A taxpayer who complies with the procedures will have to pay back taxes with interest.  In lieu of all other penalties that may apply to the undisclosed foreign assets and entities including FBAR, a reduced penalty of 27.5% will be calculated based on the highest aggregate balance in foreign bank accounts/entities or value of foreign assets during the period covered by the voluntary disclosure. The penalty may be increased to 50% if a taxpayer has or had a foreign financial account, or had a facilitator who helped the taxpayer establish or maintain an offshore arrangement, and the financial institution or the facilitator has been publicly identified as being under investigation by the IRS or Department of Justice.

It is important to keep in mind that eligibility for the above programs will depend on a number of factors.   For instance, a taxpayer is not eligible for the streamlined procedures if the IRS has already initiated a civil examination or criminal investigation prior to the taxpayer entering into the program.


While the OVDP and Streamlined Procedures are the two main tax amnesty programs, there are a number of additional options available to late filers.  For example, there are procedures for taxpayers who have only failed to file FBARs or have failed to include an informational form with their tax return, such as the form for ownership of a foreign corporation.  For this reason, if you are a delinquent taxpayer looking to catch up with the IRS, it is critical that you weigh all of the options available to you.


Currently, an estimated 9 million U.S. citizens are living abroad. A growing number of expats have begun to realize that their U.S. tax compliance obligations did not end upon their change in residency.  The IRS now offers two main tax amnesty programs, but it has the discretion to cancel the programs at any time.

If you are a delinquent taxpayer living abroad, a number of options are currently available to you, including and in addition to the IRS amnesty programs.  Each option has its advantages and disadvantages, and choosing the best way forward requires a careful analysis of your particular facts and circumstances.  Our experts at Expat Tax Professionals are available to help discuss your options and guide you through each step of the disclosure process.

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