If your clients haven’t been paying their American taxes, they have another opportunity to confess to IRS.

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New IRS commissioner John Koskinen has announced improvements to offshore account compliance programs. The two programs, the Offshore Voluntary Disclosure Program (OVDP) and the 2012 Streamlined Filing Program, are meant to encourage non-filing and non-reporting Americans abroad to file previous years U.S. tax returns, foreign bank reports and other IRS compliance forms.

Since the first program launched, some 45,000 taxpayers have voluntarily paid the IRS $6.5 billion in taxes, interest and penalties.

What are the improvements?

The current Streamlined Program required non-compliant Americans in Canada to file the previous three years’ returns and six years’ Foreign Bank Account Reports (FBARs). To qualify for this program, the taxpayer could not have tax liability in any of the three years greater than $1,500, and would be required to answer a two-page questionnaire.

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The new program eliminates the questionnaire and the $1,500 threshold. Instead, the taxpayer must certify that failure to comply with past filing and reporting obligations was due to “non-willful conduct.”

Changes to the OVDP program include:

  • the elimination of the reduced penalty percentage for certain taxpayers, given the new options available under the new streamlined program;
  • the requirement for taxpayers to submit all account statements, and the payment of the offshore penalties at the time of the OVDP application; and
  • the ability for taxpayers to provide account statements electronically.

Additional information on both programs is available here.

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Terry F. Ritchie is enrolled to practice before the IRS as an Enrolled Agent and is Director of Cross-Border Wealth Services for the Cardinal Point group of companies in the U.S. and Canada.