A recent court decision from the United States Court of Federal Claims shows the impact of a poorly advised Streamlined Filing Compliance Procedures (Streamlined Program or SFCP) submission.\u00a0 See Flint v. U.S., No. 21-1202T (Fed. Cl. Aug. 23, 2022).\u00a0 In Flint, the taxpayer failed to file FBARs regarding significant holdings in foreign accounts.\u00a0 After the taxpayer\u2019s husband passed away, the estate (Taxpayer) attempted to become compliant through the IRS\u2019s Streamlined Domestic Offshore Procedures (\u201cSDOP\u201d).\u00a0 The IRS flagged the submission and assessed the maximum willful FBAR penalties against the Taxpayer because the IRS determined that the Taxpayer was willful.<\/p>\n\n\n\n
Who Is Eligible for the Streamlined Program?<\/p>\n\n\n\n
The single most significant eligibility requirement for the SFOP and SDOP is that the taxpayer was \u201cnon-willful\u201d in his or her failure to report all income, pay all taxes and submit all required information returns (including the FBAR).<\/p>\n\n\n\n
The taxpayer must certify his or her non-willful conduct in\na narrative statement signed under penalties of perjury. The certification\nshould include the specific facts (good and bad) surrounding the non-filings,\nthe taxpayer’s personal background, the source of funds in the foreign\naccounts, the taxpayer’s relationship with the foreign country where the\nforeign financial accounts are located, and the name and contact details for\nany professional adviser the taxpayer may have relied upon.<\/p>\n\n\n\n
Because the Streamlined penalty framework is so favorable, we\nhave found that it is common for taxpayers to fail to highlight potentially\nnegative facts when speaking with their tax legal counsel. For this reason, it\nis critical that tax counsel fully review and analyze the non-willful position,\nincluding a review of all relevant facts and supporting documents. Tax counsel\nmust carefully evaluate and professionally assess a taxpayer’s eligibility for\nthe Streamlined Program, then draft a narrative statement that complies with\nthe Streamlined Program requirements. Legal counsel must make a legal\ndetermination as to whether the conduct falls within the SFCP requirements. <\/p>\n\n\n\n
If a taxpayer fails to provide a complete and detailed\nnarrative statement, the IRS may reject the taxpayer’s Streamlined submission.\nAnd worse, if the taxpayer provides false or fraudulent information in the\nnarrative statement, the taxpayer could potentially face criminal prosecution.<\/p>\n\n\n\n
In the Flint decision, the court concluded that there was\nsufficient evidence to support the IRS’s determination that the Taxpayer had\nacted recklessly or with willful blindness. More specifically, the facts showed\nthat Taxpayer failed to: (1) advise her tax preparer of the foreign accounts\neach tax year; and (2) check the boxes “yes” regarding her interests\nin foreign accounts. In finding against Taxpayer,\nthe court used specific statements that Taxpayer had made as part of her SDOP\nsubmission.<\/p>\n\n\n\n
In summary, the court decision reminds us that there are risks\nof submitting an improper SFCP submission to the IRS, particularly where there\nare bad facts or no facts to support an argument that the conduct was\nnon-willful.<\/p>\n","protected":false},"excerpt":{"rendered":"
A recent court decision from the United States Court of Federal Claims shows the impact of a poorly advised Streamlined Filing Compliance Procedures (Streamlined Program or SFCP) submission.\u00a0 See Flint v. U.S., No. 21-1202T (Fed. Cl. Aug. 23, 2022).\u00a0 In Flint, the taxpayer failed to file FBARs regarding significant holdings in foreign accounts.\u00a0 After the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"1","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4313","post","type-post","status-publish","format-standard","hentry","category-planning-for-tax-minimization"],"_links":{"self":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4313","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/comments?post=4313"}],"version-history":[{"count":1,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4313\/revisions"}],"predecessor-version":[{"id":4317,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4313\/revisions\/4317"}],"wp:attachment":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/media?parent=4313"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/categories?post=4313"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/tags?post=4313"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}