When trying to determine if you are eligible for the IRS Streamlined Offshore Disclosure Program, the first thing to ask yourself is, "Do I have criminal exposure?” If the answer is yes, it's likely in your best interest to avoid the Streamlined program altogether; instead, you would probably want to enter the standard Offshore Voluntary Disclosure Program (OVDP). Truth be told, the factors that create risk for criminal prosecution are not always what you might expect. Many taxpayers — despite their best intentions — might actually be at risk, even though they're under the belief that they are not.
Now, assuming you are not at substantial risk for criminal prosecution, the next question to ask is, "Are you willful in your non-reporting?" If you were, you are automatically disqualified from entering the streamlined program. At this point, it would seem that your primary option is to enter into the full OVDP. The silver lining is that even if you were willful — but do not have a tax liability — you may not need to enter into the full OVDP, but rather follow the delinquent FBAR and informational returns procedure.
The benefits of being non-willful
To qualify for the Streamlined Offshore Disclosure Program, you want to clearly prove that you were non-willful. You can then qualify for a reduced penalty rate of 5% if living in the U.S., or 0% if you’re an expat. This is where having an attorney is critical. A legal opinion on the perceived willfulness or non-willfulness of your case can prove invaluable.
Unfiled returns? It depends
If you are living in the U.S., having unfiled and overdue tax returns will generally disqualify you from entering into streamlined procedures. On the other hand, if you are an expat, unfiled returns are not fatal to streamlined disclosure eligibility.
A blacklisted bank does not disqualify you from the streamlined program – willfulness does
Another important thing to consider with the streamlined procedures is if your bank is on the “blacklisted banks" list. This seems to cause a great amount of confusion. People assume that if their bank is on the list, they are immediately subjected to a 50% account penalty and are ineligible for a streamlined OVDP. Thankfully, that’s not how it works.
For more insight, watch our video below to figure out if the Streamlined Disclosure Program may be your best option. And if you need assistance, contact us. We can help. Call us at 888-727-8796 or email info@irsmedic.com.
