Note: Around 5:20 of the video above about we discuss mutual enforcement agreements that the IRS has with Sweden, France, Netherlands, Denmark and Canada. According to Tricia Moon, along with several other credible expat advocates, if a US expat incurs a tax liablity while residing in one of those countries, that country will not enforce the mutual agreement. For example, if you live in the US, run up a US tax debt, and then move to Canada, that is a fact pattern in which you may expect Canada to collect IRS taxes on behalf of the IRS. More on this here at the Isaac Brock Society. We make no claim that expats should rely on this as protection as one can't assume that the government will follow the law, or not invent an alternative fact pattern.
The IRS has been short staffed and under budgeted for several years now. We've seen a decline in the overall services of the IRS; hold times are longer, Revenue Agents are over-worked, and audits have dropped across the board.
On the other hand, the IRS is constantly putting out press releases about different targets they intend on auditing harshly. Recently they stated that they would be targeting international issues with a vengeance. Yet the target deadlines have come and gone without a peep, leading many to believe that the IRS just isn't going to back up their threat.
The same could be said for Streamlined Submissions for offshore accounts. For years, the IRS has been saying that those submissions would be ripe fodder for audits. But again, not a peep.
Until now. We have been receiving calls over the last few days from people whose Streamlined Submission is under audit. This is the very first time we have seen this happen.
We believe that the IRS sees an opportunity to collect easy penalties. We believe this because their training says so.
Audits can go way back. Many people will ask their tax professional how long the IRS has to audit a return, and the answer is either 3 years or 6 years depending on certain facts. But with international returns, there is a critical fact most tax professionals don't quite understand. For instance, on a 2011 submission you would think the 6 year statute of limitations is drawing near.
But this is what we know, and what we suspect the IRS knows. Most Streamlined Submissions, aside from the most basic, have significant errors. They are missing critical international reporting forms. If one of those forms is missing, the statute of limitations on assessments has not actually begun to start! If your Streamlined submission was done sloppily, the IRS could have forever to audit you and assess you additional taxes — and additional penalties (aside from FBAR penalties). These penalties are typically $10,000 per occurrence. And, if you are missing these forms the IRS can look back outside your audit period to assess you additional penalties. This means people who thought they avoided the FBAR penalty threat have another threat pending that cannot expire.
The IRS has to take advantage of all the "low hanging fruit" that they can, as quickly and easily as possible. If I had to guess, this is just the beginning of the audits and we will most likely get more and more calls from people getting audited for their Streamlined Submissions and Soft Disclosures.
When we submit any Streamlined Submissions to the IRS, we always submit them under the assumption that they will be audited. We are extremely detail oriented and thorough. Unfortunately, we often get clients who come to us and ask for assistance because the company they hired to do their submission has made errors.
If you have been contacted by the IRS because your submission is being audited, or if you just want a second opinion on a submission done on your behalf, contact us. Submissions can be amended. We can help. Call us at 888-727-8796 or email firstname.lastname@example.org.