Missing Returns – IRS Streamlined Procedure

The IRS streamlined procedure (sometimes called the amnesty program) was created to help taxpayers who unintentionally missed filing previous years of world wide income or foreign accounts. The procedure is typically used as a one time “whoops” fix, giving grace. Doing so aims to provide financial relief to taxpayers, avoiding hefty penalties and fees that have piled up. It’s designed for those who simply didn’t know they were supposed to, not for those who deliberately avoided filing.

What it offers

There are two different versions of the program:

• Streamlined Foreign Offshore Procedures: This is used for U.S. citizens or green card holders living outside of the U.S.
• Streamlined Domestic Offshore Procedures: This is used for those who live in the U.S. but have unreported foreign income or accounts.

To qualify, you must prove that your failure was non-willful. In the event they suspect intentional willfulness, it will be denied. In exchange for catching up, the IRS will generally waive most penalties.

A typical streamline submission includes:

• The last 3 years of tax returns
• The last 6 years of FBARs
• A signed Statement of Non-Willfulness explaining why you didn’t file before

Is the streamlined procedure a “one-time” program?

Yes, at least in the eyes of the IRS. It’s meant to be a one-time opportunity to redeem yourself. Once you’ve submitted your application under the procedure, the IRS expects you to be compliant moving forward, assuming you now understand the compliance rules.

You generally can’t “start over” with a second streamlined filing. Why? – Because the program is intended for taxpayers who are coming forward for the first time. Using it again could be seen as inconsistent with the certification you made and that you are non-willful.

In rare circumstances, a second submission might be justified. However, proving yourself unintentional for a second time would be very difficult. The IRS may fail to see how you became uncompliant after already giving you a “get out of jail” free pass. If you are looking to fix mistakes from your prior submission, there may be options to help.

Alternative Options

Life happens, and it’s not totally uncommon to miss something in previous years. Perhaps an old foreign account came to light, or you realized a business account abroad wasn’t reported correctly. If you’ve already filed your first streamlined procedure, there are a few things you can do:

1. Amend your initial streamlined submission
   • If the issue relates to the same years you already filed for, you may be able to correct or supplement your submission with a detailed letter.
2. File normally for new years
   • If the problem involves later years, (after your initial filing), just file those returns and FBARs as you normally would – on time and with full disclosure
3. Consider the Voluntary Disclosure Program (VDP)
   • If your situation involves unreported income or assets that could look willful, the VDP may be a safer path. It’s more thorough, but can protect you from potential criminal exposure.

Come clean the first time

The streamlined procedure is one of the most forgiving amnesty programs the IRS offers, but it’s not a revolving door. It’s meant to give honest taxpayers the chance to fix past mistakes and move forward with a clean record. The goal is to put everything on the table that has never been filed and set you up for compliance. If you find prior mistakes, don’t panic, correct mistakes with a tax professional without jeopardizing your prior filings.