Tax Law Center Blog

Yesterday, as expected, the IRS announced its new New Filing Compliance Procedures for Non-Resident U.S. Taxpayers that taxpayers presenting “low compliance risk” should file delinquent tax returns, including delinquent information returns, for the past three years; and delinquent FBARs for the past six years.  This seems to be a new EZPASS or express OVDP without any penalties.

Taxpayers with higher compliance risk are not eligible for the New Filing Compliance Procedures for Non-Resident U.S. Taxpayers. Such taxpayers will be subject to a “more thorough review and possibly a full examination, which in some cases may include more than three years, in a manner similar to opting out of the Offshore Voluntary Disclosure Program”.

Opting may not be a bad situation.  Depending on the circumstances, we sometimes recommend some of our OVDI clients to opt out of the voluntary disclosure initiative and allow us to demonstrate the absence of willfulness and avoid the normal FBAR penalty regime. We have been aggressively pursuing OVDI opt outs for some of our clients. In doing so we have been persuasively advocating for no penalties or the FBAR Penalty Mitigation guidelines to apply.

Under the new New Filing Compliance Procedures for Non-Resident U.S. Taxpayers there is an IRS Questionnaire required for entrants. If you filed returns but did not report all income it appears you cannot amend via this new program since amended returns are “high risk”, except for the sole purpose of filing Form 8891 regarding retirement or savings plans by treaty. Also, once a taxpayer attempts this new streamlined program, the OVDP is no longer available.  Even worse, there appears to be no immunity from criminal prosecution through this new program (if the IRS determines high risk or ineligibility). Therefore, careful full legal analysis of all risk factors is required.  Legal counsel is strongly recommended.

In spite of all restrictive eligibility criteria, is this a new alternative to OVDP for Non-Resident U.S. Taxpayers? Our law firm absolutely thinks so.  We intend to comprehensively explore this alternative for our clients and expect to aggressively advocate for a very wide new EZPASS or express OVDP lane for entrants.

Patel Law Offices is a law firm dedicated to helping clients resolve complicated tax, criminal tax, and international tax problems. Our firm assists (and defends) clients and their advisors to legally disclose (and legitimize) foreign accounts.