Streamlined Offshore Voluntary Disclosure: When does it work?

Many people are looking for alternatives to the Offshore Voluntary Disclosure 27.5% (or 50%) penalty.  One more possible alternative. The Streamlined Offshore Voluntary Disclosure program. In this article, we will discuss what it is who qualifies and some of the risks.



What is the Streamlined offshore voluntary disclosure program?

The streamlined offshore voluntary disclosure program used to be strictly for taxpayers who are expatiates and have not filed tax returns to come into compliance with their worldwide reporting obligations. In 2014, that changed to now include domestic filers and also those who have to file tax returns.


The program is less intensive than the standard offshore voluntary disclosure program, both in processes and potential penalties. In particular there is no offshore penalty that will be assessed in-lieu-of FBAR penalties for those living overseas, a 5% penalty for those who live in the US. Other keys benefits: only three years of tax returns need to be prepared and only six FBARs (or other informational returns, if required) need to be filed.


What happens if you file a streamlined offshore voluntary disclosure and you don't qualify?

The IRS claims that your returns will be audited. Now, while the official guidance from the IRS states that this audit will be treated the same as an opt-out audit, it is difficult to see that policy being enforced. The reason why is during an opt-out of the standard offshore voluntary disclosure program, there is no threat, no leverage the IRS has of bringing criminal charges. However remote, during an audit of a streamlined disclosure there is a threat of criminal charges – and this leverage may result in the taxpayer in agreeing to devastating FBAR penalties.


Bottom Line: 80% of our clients qualify for the Streamlined Disclosure. Click on the box below to get answers to some of the more common questions and see if you may qualify.