OVDP and Streamlined Procedures: Am I Non-Willful?
Journal of Tax Practice & Procedure, August - September 2014
5 Pages Posted: 14 Oct 2014
Date Written: October 13, 2014
Abstract
The IRS recently announced Streamlined Filing Compliance Procedures in an effort to encourage “non-willful” U.S. taxpayers to come into compliance with their reporting and filing requirements associated with varying interests in foreign financial accounts and assets. The streamlined procedures require the filing of original or amended tax returns reporting not only whatever foreign source income was generated in each of the applicable tax years but also properly reporting any U.S. source income and deductions for each of the applicable tax years.
Taxpayers pursuing resolution of a foreign account issue within the streamlined procedures are required to certify, under penalties of perjury, that their conduct was “non-willful.” For purposes of the streamlined procedures, non-willful conduct is defined as conduct that is “due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law.”
Taxpayers and their representatives must be cautious when certifying non-willful status to the government. The vast majority of taxpayers having previously undisclosed interests in a foreign financial account or asset likely believe they are more “non-willful” than not. The issue at hand in the streamlined procedures is whether the IRS will agree.
The IRS has indicated it will review each certification of non-willful status seeking participation in the streamlined procedures. Disclosure of the account to the return preparer or others will be an important factor. Another factor is the source of funds held in the foreign account. If the source of funds in the account was from unreported income, the situation can become somewhat problematic. However, having inherited funds in a foreign financial account, without more, might not be considered deserving of non-willful status by the IRS.
Keywords: OVDP, streamlined procedures, irs, irs examination, fbar, fbar examination, non-resident, resident, tax dispute, OVDI
Suggested Citation: Suggested Citation