All tax returns submitted under the IRS streamlined OVDI procedures must have a valid Taxpayer Identification Number (TIN). Tax returns submitted without a valid SSN or ITIN will not be processed under the streamlined procedures. However, for taxpayers who are ineligible for an SSN but do not have an ITIN, a submission may be made under the IRS streamlined ODVI procedures if accompanied by a complete ITIN application.
Tax returns submitted under the IRS streamlined OVDI will be processed like any other return submitted to the IRS. Consequently, receipt of the returns will not be acknowledged by the IRS and the streamlined filing process will not culminate in the signing of a closing agreement with the IRS. As with the filing of any tax return, it is an excellent idea to mail the return under certified post return green card required. Then you will have both proof of mailing and a tracking number.
Amazingly, returns submitted under either Streamlined Procedure are not automatically subject to IRS audit. However, they may be selected for audit under the existing audit selection processes applicable to any U.S. tax return and may also be subject to verification procedures in that the accuracy and completeness of submissions may be checked against information received from banks, financial advisors, and other sources. Returns found to have issues after IRS examination may be subject to additional civil penalties, and even criminal liability, if appropriate. After a taxpayer has completed the streamlined filing compliance procedures, he or she will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures.
If a taxpayer is concerned that their failure to report foreign income could be viewed as being due to willful conduct and is concerned about the potential for criminal liability and/or substantial monetary penalties, he or she should consider participating in the Offshore Voluntary Disclosure Program (OVDP.) If willfulness is at all a question, legal advice should be sought before acting.
Once a taxpayer makes a Streamlined submission, the taxpayer may not participate in OVDP. Similarly, a taxpayer who submits an IRS streamlined OVDI disclosure letter pursuant to OVDP on or after July 1, 2014, is not eligible to participate in the streamlined procedures. A taxpayer is eligible for treatment under the streamlined procedures who submits, or has submitted, a voluntary disclosure letter under the IRS streamlined OVDI procedure prior to July 1, 2014, but who does not yet have a fully executed OVDP closing agreement. They may request treatment under the applicable penalty terms available under the streamlined procedures. A taxpayer seeking such treatment does not need to opt out of OVDP, but will be required to certify, that the failure to report all income, pay all tax, and submit all required information returns, including FBARs, was due to non-willful conduct. As part of the IRS streamlined OVDI process, the IRS will consider this request in light of all the facts and circumstances of the taxpayer’s case and will determine whether or not to incorporate the streamlined penalty terms in the IRS streamlined OVDI closing agreement.