Streamlined Filing Compliance Procedures for Individuals

The streamlined filing compliance procedures (“streamlined procedures”) described below are available to taxpayers who certify that their failure to report foreign financial assets and pay all tax due in respect of those assets was non-willful. The procedures are designed to provide taxpayers in such situations with (i) a streamlined method for filing amended or delinquent returns and (ii) terms for resolving their tax and penalty obligations.

Originally offered on September 1, 2012, the streamlined procedures were expanded and modified in 2014 to accommodate a broader group of U.S. taxpayers, including certain U.S. residents, and to eliminate the former $1,500 tax-due threshold and the prior risk-assessment questionnaire. The streamlined procedures are separate from the now-closed Offshore Voluntary Disclosure Program (OVDP), which ended on September 28, 2018.

Eligibility and certification

• Non-willful standard: negligence, inadvertence, or good-faith misunderstanding of the law (not intentional non-compliance).
• Taxpayers must submit a signed non-willfulness certification explaining the facts and circumstances.
• A valid SSN/ITIN is required; an ITIN can typically be applied for and included with the submission when needed.
• Not eligible: Taxpayers currently under IRS civil examination for a covered year, or with indicators of willful conduct or criminal investigation.

Notes and cautions

• “Quiet” filings (amending returns or submitting late FBARs outside a recognized procedure) can lead to examinations and penalties.
• Streamlined submissions are subject to IRS review. The IRS may accept a submission as filed, request more information, or assert additional tax/penalties if the facts do not support eligibility.

Delinquent FBAR Submission Procedures

The Delinquent FBAR Submission Procedures (DFSP) allow certain taxpayers to file late FBARs when the underlying income from the foreign accounts was properly reported and tax paid on their U.S. returns, no civil examination or criminal investigation is underway, and the failure to file was non-willful.

Key points

• File the missing FBARs electronically via the BSA e-Filing system and include a brief statement explaining the reason for filing late.
• When eligibility criteria are met, the IRS generally will not impose FBAR penalties under DFSP. If other issues are present (e.g., unreported income), another path (e.g., Streamlined) may be more appropriate.
• Maintain supporting records for at least five years from the FBAR due date.

Delinquent International Information Return Submission Procedures

The Delinquent International Information Return Submission Procedures (DIIRSP) address late or previously unfiled international information returns (for example, Forms 3520/3520-A, 5471, 8858, 8865, 8938) in cases of non-willful non-compliance. Taxpayers submit the delinquent forms with a reasonable-cause statement, if applicable.

Important updates

• The IRS may assess penalties for delinquent international information returns even when a reasonable-cause statement is included; penalty relief is not automatic.
• Submissions should be complete and consistent with the related amended or original income tax returns. Expect follow-up correspondence if the IRS requires additional information.
• Where multiple regimes could apply (e.g., Streamlined vs. DIIRSP), seek advice on selecting the appropriate path.

IRS Criminal Investigation Voluntary Disclosure Practice

The IRS Criminal Investigation Voluntary Disclosure Practice (VDP) provides a path for taxpayers whose non-compliance may have involved willful conduct to come forward, cooperate, and work toward a civil resolution. A voluntary disclosure does not guarantee immunity from prosecution, but timely, truthful, and complete disclosures are a factor CI considers in exercising prosecutorial discretion.

Process overview (high level)

• Preclearance (Form 14457, Part I): Submitted to CI to determine preliminary eligibility.
• Preliminary acceptance and submission (Form 14457, Part II): A detailed narrative and cooperation commitments are provided; the case is transferred for civil examination and resolution.
• Civil resolution framework: Typically covers multiple tax years. Civil penalties can include the civil fraud penalty (on at least one year), accuracy-related or failure-to-file/pay penalties for other years, and—in offshore cases—an FBAR willful penalty (often applied to one year), subject to facts and current IRS guidance.
• Full cooperation is required, including provision of records, amended returns, and payment arrangements for tax, interest, and penalties.

VDP is generally inappropriate where conduct was non-willful (the streamlined procedures may be a better fit). If CI has already initiated an investigation, a voluntary disclosure may be unavailable.

IRS Criminal Investigation (overview)

IRS Criminal Investigation (CI) is the law-enforcement arm of the IRS that investigates potential criminal violations of the Internal Revenue Code and related financial crimes. CI leverages data analytics and cooperation with domestic and international partners. Indicators of willfulness, badges of fraud, or obstructive conduct can elevate matters to CI interest.

If you believe your facts could implicate willful conduct, do not file “quiet” returns. Seek legal and tax advice promptly to assess whether a voluntary disclosure or other remediation path is appropriate.