The IRS recently changed its' procedure for handling delinquent information returns. The 2012 OVDP FAQ# 18 originally provided automatic penalty relief, but was only available to taxpayers who were fully tax compliant.
Then the IRS modified the Delinquent International Information Return Submission Procedures and clarified how taxpayers may file delinquent international information returns in cases where there was reasonable cause for the delinquency. Taxpayers who had unreported income or unpaid tax were not precluded from filing delinquent international information returns. However, unlike the procedures described in OVDP FAQ#18, penalties may have been imposed under the Delinquent International Information Return Submission Procedures if the Service does not accept the explanation of reasonable cause.
Now the IRS has recently changed their website on Delinquent International Information Return Submission Procedures (DIIRSP) which now provides:
Taxpayers who have identified the need to file delinquent international information returns who are not under a civil examination or a criminal investigation by the IRS and have not already been contacted by the IRS about the delinquent information returns should file the delinquent information returns through normal filing procedures.
Penalties may be assessed in accordance with existing procedures.
- All delinquent international information returns other than Forms 3520 and 3520-A should be attached to an amended return and filed according to the applicable instructions for the amended return.
- All delinquent Forms 3520 and 3520-A should be filed according to the applicable instructions for those forms.
- Taxpayers may attach a reasonable cause statement to each delinquent information return filed for which reasonable cause is being asserted.
- During processing of the delinquent information return, penalties may be assessed without considering the attached reasonable cause statement.
- It may be necessary for taxpayers to respond to specific correspondence and submit or resubmit reasonable cause information.
Information returns filed with amended returns will not be automatically subject to audit but may be selected for audit through the existing audit selection processes that are in place for any tax or information returns.
These procedures now clearly provide for normal filing of late delinquent returns, with a reasonable cause statement, which may be considered after the filing and after the automatic assessment of penalties.
This Procedure Is No Different Than Filing Any Late Return
and is Evidence that the DIIRSP Has Been Eliminated.
What Does This Mean For Streamlined Offshore And Domestic Procedures?
We previously posted Comm'r Warns Taxpayers - Streamlined Offshore Procedures Won't Last Forever! where we discussed that while there is still a trickle of non-willful taxpayers cleaning up under the Streamlined Offshore Procedures, the IRS has made it clear that this the Streamlined Offshore Procedures won't last forever and this may be non-willful taxpayer's last chance to report previously undisclosed foreign accounts under this program.
These IRS' ending the OVDP program, the Delinquent Information Return Program and the proposed ending of the Streamlined Offshore Procedures, reflect an ongoing efforts by the U.S. government to make offshore tax compliance a priority.
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