This Year’s Version of the Streamlined Amnesty Program’s Non-Willful Certification (Form 14653)
A key requirement for participating in the IRS’s Streamlined amnesty program is a certification by the late filer that his or her delinquency was the result of non-willful conduct.
As part of a Streamlined submission, the taxpayer must include a Form 14653 (Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures) or Form 14654 (Certification by U.S. Persons Residing In the United States), depending on the residence of the individual, and include an explanation of non-willfulness.
Under the Streamlined program, non-willful delinquent taxpayers living abroad who have failed to file previously with the IRS can come clean and avoid severe penalties by filing the prior 3 years of tax returns and 6 years of FBARs. The certification form requires the taxpayer to explain how the delinquency was a result of non-willful conduct.
The Certification Form
This year’s version of the certification form looks very similar to last year’s beefed-up version of the form. This year’s form again states that the taxpayer’s explanation of non-willfulness must include the following:
- Specific reasons for your past failure, whether favorable or unfavorable to you, including your personal background, financial background, and anything else you believe is relevant to your failure.
- An explanation as to the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it.
- An explanation of your contacts with the account/asset including withdrawals, deposits, and investment/ management decisions.
- A complete story about your foreign financial account/asset.
- If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice (this requirement was previously included).
- If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts (this requirement was also previously included).
Amendment to the Form
The only significant change to this year’s version of the certification form is the addition of this paragraph to the introductory section of the form:
I acknowledge the possibility that amended income tax returns I am submitting under the Streamlined Foreign Offshore Procedures may report income for tax years beyond the three-year assessment limitations period under I.R.C. § 6501(a). Other assessment limitations periods in I.R.C. § 6501 may allow the Internal Revenue Service to assess and collect tax. If I seek a refund for any tax or interest paid for the omitted income that I am reporting on my amended income tax returns because I feel that my payments were made beyond the assessment limitations period, I understand that I will forfeit the favorable terms of the Streamlined Procedures.
This is a significant addition because it warns that in the case of a filing of an amended return as part of your Streamlined submission, the claiming of a refund could jeopardize eligibility for the program. If a refund happens to be due to you, it’s important to understand whether that refund relates to the reporting of income beyond the three-year assessment limitations period. If so, then you may need to weigh the benefits of the refund against the favorable terms of the Streamlined amnesty program.
The Takeaway For U.S. Expats
If you are an expat considering the Streamlined program, then it is important that you understand the requirements and relief available to you, and that you act quickly to participate in the program before it is further modified or before it eventually runs its course.
Our expat professionals have helped many clients successfully participate in the Streamlined program as well as other IRS amnesty programs. Our team of experts has the knowledge and experience to help you utilize the Streamlined program in the best manner possible and to mitigate, or even eliminate, any payment of back taxes to the IRS. We are available to help discuss your situation and guide you through every step of the disclosure process.
By Ephraim Moss, Esq. & Joshua Ashman, CPA