Remedial

Streamlined Filing Compliance

The Streamlined Filing Compliance Procedures allow taxpayers who non-willfully failed to file required US returns and international information forms (FBAR, 3520, 8938) to come into compliance. The foreign-based version (Streamlined Foreign Offshore Procedures) carries zero penalties if you qualify as a non-resident. The domestic version requires a 5% miscellaneous offshore penalty.

Key Points

  • You must certify that your failure to comply was non-willful (not intentional neglect).
  • The Streamlined Foreign Offshore Procedures (for non-residents) have zero penalties.
  • The Streamlined Domestic Offshore Procedures carry a 5% penalty on the highest account balances.
  • You must file 3 years of amended/delinquent tax returns and 6 years of FBARs.
  • The program is not available to taxpayers under IRS audit or criminal investigation.

Action Items

  1. 1.Determine whether you qualify for the foreign or domestic streamlined procedures.
  2. 2.Prepare 3 years of amended or delinquent US tax returns with all required international forms.
  3. 3.File 6 years of delinquent FBARs through the BSA E-Filing System.
  4. 4.Complete the certification statement explaining your non-willful conduct.
  5. 5.Consider engaging a cross-border tax professional experienced with streamlined filings.

Frequently Asked Questions

What does "non-willful" mean in this context?

Non-willful means conduct due to negligence, inadvertence, or mistake, or conduct resulting from a good-faith misunderstanding of the law. It does not include deliberate avoidance.

Can I file streamlined if I already filed US returns but missed FBARs?

Yes. You can use the streamlined procedures even if you filed tax returns but omitted international information returns like FBARs, Forms 3520, or Form 8938.

Is there a deadline to use the Streamlined procedures?

There is no official deadline, but the IRS can close the program at any time. It is advisable to file as soon as you become aware of your non-compliance.

Related Scenarios

Critical

TFSA US Tax Trap

The Tax-Free Savings Account is tax-exempt in Canada but receives no treaty protection in the US. The IRS classifies a TFSA as a foreign grantor trust, requiring Forms 3520 and 3520-A annually. Failure to file can result in penalties starting at $10,000 per form per year.

Critical

FBAR Filing Requirements

The Report of Foreign Bank and Financial Accounts (FBAR) must be filed by any US person with foreign financial accounts exceeding $10,000 in aggregate at any point during the year. The FBAR is filed electronically with FinCEN, not the IRS, and has its own deadline and penalty regime.

Core

Substantial Presence Test

The Substantial Presence Test (SPT) uses a weighted formula across three years to determine if a foreign national is a US tax resident. If you meet the test, you are taxed on worldwide income. Understanding the SPT is essential for snowbirds and anyone splitting time between Canada and the US.

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