Normally, the tax-rules that taxpayers must follow are contained in the Internal Revenue, Code, Treasury Regulations promulgated by the IRS, Revenue Rulings issued by the IRS and court cases. For taxpayers seeking to enter either the IRS’ formal criminal amnesty program (OVDP) or penalty relief filing program (Streamlined Filing Compliance Procedures), however, the rules that must be followed are not found in these traditional tax sources.

For the OVDP, the rules are contained in IRS published Frequently Asked Questions and Answers. These are the bible – what it takes to qualify for criminal amnesty and FBAR penalty relief.

For the Streamlined Filing Compliance Procedures, the IRS has published rules on several pages and in Frequently Asked Questions and Answers. These can be found at:







Initially, Forms 14653 and 14654 stated only that streamlined filers had to submit reasons in support of the conclusion that their conduct in non-filing or non-reporting was non-willful.

The IRS soon became concerned that many streamlined filing were being made with only a general statement of the conclusion of non-willfulness without supporting facts being included.   When a streamlined filing is received by IRS, the agency does not initially determine if it agrees with the conclusion of the streamlined filing certification, but does review the affidavit for whether there are sufficiently detailed factual statements in support of that conclusion.

As a result of these concerns, Forms  14653 and 14654 were revised to include the following paragraph in red text:

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.


Apparently, IRS was still not satisfied that the message was received because it has now added new questions and answers to its published FAQs. The new FAQs describe with particularity what sort of factual presentation taxpayers, whether residing inside or outside of the U.S., must provide in support of a conclusion that conduct was non-willful, as follows:

 Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts. Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/management decisions. Provide a complete story about your foreign financial account/asset.

The new FAQs further state:

The following points address common situations that may apply to you:

  • We realize that many taxpayers failed to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, simply provide your explanation.
  • We realize that some taxpayers that owned or controlled a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) failed to properly report ownership of the entity or transactions with the foreign entity. If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, explain why and include your understanding of your reporting obligations to the IRS and to foreign jurisdictions.
  • If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.
  • If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

Note that the above statements that IRS realizes taxpayers have made mistakes does not mean that IRS will accept any explanation as establishing non-willfulness or will not conclude that the taxpayer’s admissions present evidence of criminal conduct.

A tax attorney experienced in these matters should determine if the taxpayer is eligible for the streamlined process, if the streamlined process is appropriate for the client and represents the safest, most cost-efficient mode of coming into compliance. The tax attorney should also review the returns prepared by an experienced expat return preparer for consistency with the streamlined filing affidavit and to ascertain that nothing in any return, on its face could be viewed, under any interpretation, as false or misleading.  The tax attorney should submit the streamlined filing package to IRS with a cover letter.

The IRS continues to be coy about what conduct it will view as willful and has provided no specific examples in the FAQs as to what conduct will tip the scales indicating willfulness or the absence of willfulness. For a discussion of non-willfulness, see my blog post on The Tax Wars Blog, “Wil-O-The Wisp Non-Willfulness in the Streamlined Filing Compliance Procedure,” at

Thus, taxpayers require the assistance of an experienced tax attorney to determined where they stand on the ladder of tax-culpability which has rungs going from completely innocent (reasonable cause or absence of negligence) at the bottom, to non-willful or willful, and leading all the way up to criminal conduct at the top.

I have prepared many streamlined filing affidavits for taxpayers residing inside and outside the U.S. and have from the beginning included the IRS suggested factual statements in my client’s affidavits.   The non-willful affidavits have run from four pages to over 20 pages in length.  None have been rejected by IRS as inadequate on their face.   When you think about it, what IRS is asking be stated is just common sense. You cannot simply say, “I am a U.S. citizen but have lived in Japan for the past ten years and didn’t think I had to file income tax returns, foreign reporting forms or FBARS in the U.S.  My oversight was from ignorance and was not intentional.” IRS will reject such unsupported statements as inadequate on their face and will then treat the filing as not qualifying for streamlined penalty relief. For, although living in Japan may suggest that the taxpayer might not have known about the filing and reporting requirements, that fact alone is not enough to establish non-willfulness or the absence of willful blindness.

Each case I have handled has been unique and has required me to root-out the very personal, specific facts that led that particular taxpayer to be out of compliance with U.S. tax filing and reporting rules.  There is no generic template. one-size-fits-all or simplistic approach for successfully using the Streamlined Filing Compliance Procedures to become tax compliant.  Thinking that there is can be dangerous and can get someone into trouble who was not in trouble to begin with.

© 2016 by Robert S. Steinberg, Esquire

This entry was posted in STREAMLINED FILING COMPLIANCE PROCEDURES, STREAMLINED FILINGS, Uncategorized and tagged , , , , . Bookmark the permalink.

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