New IRS Form for Certification
The IRS in January 2015 issued new Form 14653 (14654 for U.S. persons residing in the U.S.) which revises and replaces the required Certification by. U.S. Person Residing Outside of the Unites States for Streamlined Foreign Offshore Procedures. Formerly, the Certification statement did not have a Form number. More importantly, the new form includes in bold-red type-face the following admonition:
Note: You must provide specific facts on this form or on a signed attachment explaining your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Any submission that does not contain a narrative statement of facts will be considered incomplete and will not qualify for the streamlined penalty relief.
The above boldface paragraph is followed by the same statement contained in the original Certification format, namely:
Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts. The field below will automatically expand to accommodate your statement of facts.
Although not publicly stated, apparently IRS has been deluged with Streamlined Submissions that do not state an adequate predicate for concluding that the taxpayer’s conduct was non-willful. At a recent American Bar Association (ABA) Tax Section meeting IRS officials indicated that IRS will not further clarify what level of conduct of the taxpayer will be considered non-willful under the Streamlined Program.
No preclearance for Streamlined Filers
At the ABA meeting IRS officials also indicated that the agency has no plans to implement a preclearance process for Streamlined Submissions akin to the OVDP names preclearance procedure. Also, taxpayers cannot secure their eligibility (i.e., not under examination) by submitting a letter of intent to enter the program. Thus, the tax, information returns and certification must be submitted before IRS commences a civil examination of the taxpayer.
Streamlined filings not inexpensive
Not surprisingly in light of IRS’ coyness in refusing to more clearly define non-willfulness, one tax attorney commented at a the above ABA meeting that his firm spends more time on Streamlined cases than on many OVDP cases. To insure that the Streamlined filing does move the client from the frying pan into the fire (i.e., subject him or her to criminal charges and draconian FBAR penalties), clients are asked to provide bank records, documents showing ownership and signature authority, bank correspondence and are questioned about communications with their return preparer. Certainly, the above is essential for submission by U.S. persons and sometimes for non-U.S. persons but not necessarily for all. For example, if a client has only one offshore bank account located in the country of residence it may not be necessary to review all bank records if the client is certain that no transfers have been made to offshore accounts in other countries. But, what documents should be examined depends heavily on the facts of a particular client. In every case, however, I personally oversee the submission of the amended or original returns and FBARs and do not leave that part of the process to the return preparer acting alone.
Social Security Numbers required and obtaining one causes delays
The IRS officials acknowledged that taxpayers who need Social Security Numbers for participation in the Streamlined Program are often frustrated by delays of from six to nine months, the time it is taking to obtain an SSN.
Domestic Streamlined Filers receive more scrutiny
While IRS has yet to tabulate statistics concerning the Streamlined Filing Process, it appears that domestic filers are more closely scrutinized. For example, domestic streamlined cases with five or more foreign information returns are referred to the IRS Large Business and International Division (IRM 22.214.171.124)
Note: The comments of IRS officials and attorneys at the ABA meeting mentioned in this post were obtained from a Tax Analysts article by Andrew Velarde, “ABA Meting: No Letters of Intent Allowed before Entering Streamlined Program,” (February 3, 2015).
© 2015 by Robert S. Steinberg, Esquire
All rights reserved