The new Streamlined Filing Compliance Procedures (the Streamline Procedures) go into effect July 1, 2014. Under the terms of the procedures some taxpayers will suffer no penalty for failure to timely file FBARs, (in the case of qualifying non-resident taxpayers) or a 5% penalty for qualifying domestic taxpayers. The 5% penalty is calculated based upon the value of foreign financial assets that would have otherwise formed the basis of the civil miscellaneous penalty under the Offshore Voluntary Disclosure Program. However, in order to participate in either of the Streamline procedures taxpayers must certify to the accuracy of specific representations. Links to the certifications follow.
If a taxpayer elects to file under the Streamlined Procedure, they cannot later file a voluntary disclosure and would therefore be subject to all applicable penalties if their filing is challenged by the IRS.
The certification process should be prepared by counsel after a thorough review of the facts and circumstances. Such a review is likely to insure that the taxpayer is either a proper candidate for the Streamlined Procedure or that the taxpayer should enter the Offshore Voluntary Disclosure Program. This analysis should be done only by skilled counsel and not left to chance or guess work.
The improper use of the Streamlined Procedure can be a major trap for the taxpayer who deliberately or incorrectly elected the Streamline Procedure.
For many taxpayers, the offer of the Streamline Procedure will be like the offer made by Clint Eastwood in Dirty Harry
” Go ahead, make my day”