Delinquent International Information Return Program
Finally, if you have failed to attach or properly report one of the many foreign informational returns with your tax return (such as Form 8938, Form 1116, Form 8833, etc.), that is not the FBAR, you may file the delinquent form through the Delinquent Foreign Information Return Program.
Like the Delinquent FBAR Submission Program, you must have properly reported all the income and paid all the tax related to the information delinquently filed through this program. Thus, this program will only work if you do not submit through the Voluntary Disclosure Program or the Streamline Offshore reporting Program. Furthermore, you must not have been contacted by the IRS with respect to an audit regarding the delinquent information returns.
However, separately and in addition to the requirements above, a “reasonable cause” statement must be submitted along with the disclosure package. “Reasonable cause” has a special definition within the Internal Revenue Code and is defined by a myriad of case law.
Due to the nature of this disclosure program’s requirements, such as determining if you have reported all of your income correctly and the need to submit a ‘reasonable cause” statement, please make sure you consult with a FATCA attorney at Evolution Tax and Legal before making any sort of disclosure through this program.
Offshore Voluntary Disclosure Program Frequently Asked Questions
Will I have to go through an audit as part of my voluntary disclosure?
Generally, a full-blown audit is not required for disclosures through the Streamlined Offshore Disclosure Program, Delinquent FBAR Submission Program, and Delinquent International Information Return Program. However, it is not guaranteed that the IRS will select your disclosure package for review once they have processed it.
However, disclosures through the IRS’s Voluntary Disclosure Practice mandatorily require an audit. That is because disclosures through the Voluntary Disclosure Practice provide taxpayers with protections against certain criminal prosecution. These disclosures are very thorough, and may even require an interview of the disclosed.
How long does it take the IRS to process my disclosure package?
In my experience, it generally takes the IRS three to four months to disclose through the Streamlined Offshore Disclosure Program, Delinquent FBAR Submission Program and Delinquent International Information Return Program. Upon completion of the process, the IRS will generally issue a notice to the taxpayer making the disclosure notifying them that their disclosure practice has been processed and accepted by the IRS.
As for disclosures through the IRS’s Voluntary Disclosure Practice, this disclosure takes significantly longer, with a process that can last longer than a year. Specifically, the disclosure process works in three steps. In step one, you provide the IRS’s Criminal Investigation unit a voluntary disclosure request pre-check whereby the IRS determines if you are eligible to make a disclosure through its Voluntary Disclosure Practice. Once the pre-check is processed by the IRS, you have 45 days to complete step two. In this step, you provide the IRS certain details about the non-compliance you are disclosing supplemented by a narrative that must explain the facts behind such non-compliance. Once step two is completed and processed by the IRS, you enter step three. Step three requires the filing of amended tax returns and FBARs directly with the IRS’s Criminal Investigation unit that is supplemented by an audit. Once the audit is completed and the IRS accepted the amended return filed, the disclosure is over.
If I owe tax as part of my disclosure package, how do I pay the IRS?
There are various methods to pay any additional tax, fines, or penalties owed through an IRS disclosure program. Generally, the amounts due can be paid by check directly to the Internal Revenue Service. However, alternatively, there are payment method options directly on the IRS website which you can find here.
Will I have to go through an interview as part of entering the IRS’s disclosure programs?
Generally, an interview is not required by the IRS for disclosures through the Streamlined Offshore Disclosure Program, Delinquent FBAR Submission Program, and Delinquent International Information Return Program.
However, the same cannot be said for disclosures through the IRS Voluntary Disclosure Practice. In my experience, these disclosures are supplemented by an interview of the disclosing taxpayer. The taxpayer being interviewed is allowed to maintain the presence of their attorney through the interview to help them answer questions asked by the IRS.
If reported all my foreign income but failed to properly report my foreign accounts, what program is best for me?
If you even fail to report a single dollar of foreign income, the best disclosure programs for you are the IRS’s Streamlined Offshore Disclosure Program of the Voluntary Disclosure Practice. These programs will allow you to report previously unreported income while protecting you from civil and criminal penalties for such failure.
As for the Delinquent FBAR Submission Program and Delinquent International Information Return Program, these disclosures are preserved solely for those who reported all of their foreign income on previous US tax filings. These programs allow taxpayers to properly report previously incorrectly reported foreign financial assets. The Delinquent FBAR Submission Program and Delinquent International Information Return Program provide against civil penalties applicable to the incorrect reporting of foreign financial assets. They do not, however, protect against civil and criminal penalties for the failure to report income earned with respect to such foreign accounts.
Am I eligible to utilize the IRS voluntary disclosure programs if I live outside the United States?
Yes. These programs are even available to those taxpayers who reside outside of the United States.
Contact Our Orange County FATCA Lawyer
If you believe you have misreported any of your foreign income or assets in past tax filings or wish to have a review of your past tax filings to make a proper determination, please contact our legal team for a free consultation. Our tax attorneys will examine your past filings and make the right program recommendation for you. Thereafter, we can assist by preparing the forms required for the disclosure program that best fits you. For questions or to schedule a free consultation, please give us a call at (949) 229-6015.