My favorite IRS program – the Streamlined Disclosure Program – is going away September 28th so I had to write about it one more time. The past 10 years have seen a dramatic increase in the awareness and enforcement for the rules relating to foreign bank accounts. US citizens are required to make a number of disclosures regarding assets they have in foreign countries. For US citizens living abroad this has been especially troublesome because they often have no knowledge that US tax returns and disclosures are still needed. The IRS has done a good job getting the word out there and banks have become more diligent about discovering if they clients in foreign countries are also US citizens, but the final time of reckoning is arriving.
The IRS has a Streamlined offshore voluntary disclosure program for people to get caught up with all of the filing requirements. If you live outside the US and don’t have a tax liability (after claiming the foreign tax credit for example) you can file 3 years of tax returns and 6 years of FBARs and avoid the penalties for failing to file FBARs, 5471s 3520s, 8938s, and any other foreign disclosures you may have missed. It’s a terrific option for people to get totally caught up and then proceed with timely filings in the future, but it is ending September 28th so I would highly recommend you jump at this opportunity while it’s still available.
If you live in the US and have foreign assets that you haven’t disclosed they have an on-shore Streamline process as well which is similar, only it carries with it a 5% penalty for the highest FBAR balance. It’s another great way for people to get caught up, but it’s less generous since the person living in the US probably should have known about the disclosure rules.
This is my favorite IRS program because it allows leniency for people who aren’t trying to be tax criminals they just weren’t aware of the requirements and they live in a foreign country. I’ve seen it work for many honest clients who moved out of the US many years ago and just didn’t know they needed to continue filing US tax returns. If you think you might be in a situation needed a Streamline filing be sure to investigate it quickly, it takes time to prepare all the returns and FBARs and you don’t want to run it right up to the September 28th, 2018 deadline.