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Preparing For Audits Of Submissions Under The IRS’s Streamlined Filing Procedures

By Cassandra Vogel
The CPA Journal
June 2018 Edition

The IRS’s streamlined filing procedures for offshore assets were announced in 2012 for non-U.S. residents and extended to U.S. residents in 2014. The streamlined procedures are open to taxpayers whose failure to report foreign financial assets “did not result from willful conduct.” Under the streamlined procedures, the taxpayer must submit three years of amended tax returns and six years of Reports of Foreign Bank and Financial Accounts (FBAR), pay all of the tax and interest due, and, for U.S. residents, pay a one-time miscellaneous offshore penalty in the amount of 5% of the highest year-end value of the assets subject to the penalty. While submissions made under the streamlined procedures are not subject to the same scrutiny as under the offshore voluntary disclosure program (OVDP), they are also not provided the same insulation from criminal prosecution and willful penalties. The IRS has informed taxpayers that submissions “may be selected for audit under the existing audit processes applicable to any U.S. tax return,” meaning that only some of the submissions will be audited.

Although the streamlined procedures have been in place for years, audits of streamlined filings have only just begun. These audits require careful preparation and sensitivity, given the fact that criminal prosecution or willful penalties are not off the table if the IRS determines that the taxpayer’s conduct was willful.


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