Streamlined Filing Procedures for Disclosing Foreign Assets and Income

In June 2014 the IRS announced revised “streamlined” procedures for individuals who unintentionally fail to report foreign-source income or foreign assets, generally, foreign bank accounts.¹ In part, the revised procedures address concerns of taxpayers and their professional advisers that the traditional offshore voluntary disclosure programs (OVDPs) often resulted in unduly harsh penalties for inadvertent conduct.² Under the revised procedures, in addition to avoiding criminal prosecution, qualifying taxpayers enjoy significantly reduced penalties, and in the case of certain nonresidents, penalties may be excused entirely.

However, to take advantage of these new procedures, individuals must demonstrate to the satisfaction of the IRS that their conduct was not “willful.”³ As discussed below, such a burden calls for careful consideration whether to disclose income and/or assets under the new streamlined procedures or whether the traditional OVDP remains the preferable option.⁴

Background

Since 1970, individuals have been required to report their ownership of and/or signature authority over foreign financial accounts,⁵ but not until 1976 did the IRS ask individuals if they had such accounts. Specifically, Schedule B, Interest and Ordinary Dividends, line 7a, of the current Form 1040, U.S. Individual Income Tax Return, asks, “At any time during [the tax year] did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country?” If the answer is “yes,” the form next asks, “[A]re you required to file FinCen Form 114, Report of Foreign Bank and Financial Accounts (FBAR), to report that financial interest or signature authority?”

These questions are intended to make individuals aware of their responsibility to file an FBAR whenever the total of their foreign accounts exceeds $10,000 at any time during a tax year.⁶ For tax years beginning after Dec. 31, 2015, the form is due April 15, with a maximum six-month extension to Oct. 15.⁷ In certain circumstances, failing to file an FBAR can result in criminal and/or civil exposure. Civil penalties of $10,000 per account are imposed on any person who fails to timely file the report.⁸ Where a person willfully fails to file the FBAR, the penalty may be up to $100,000 or 50% of the balance in the account at the time of the violation.⁹ However, the IRS has recently clarified that in most willful-violation cases the total penalty for all years under consideration will not exceed 50% of the highest aggregate balance for all unreported foreign accounts during the years under examination; and for nonwillful violations, the penalty will generally not exceed $10,000 per year, regardless of the number of unreported accounts.¹⁰

In an effort to encourage individuals to report their offshore accounts, from March 2009 to October 2009, the IRS conducted an OVDP for reporting those accounts and paying related income tax without fraud penalties or possible criminal prosecution (2009 OVDP).¹¹ This program was followed in February 2011 by another “amnesty” that closed in September 2011 (2011 OVDP).¹² ­Finally, in June 2012, the IRS announced an OVDP without a specific closure date but made clear it could be closed or changed at any time (2012 OVDP).¹³ As a result of the OVDPs, as of June 2014, the IRS had collected almost $6.5 billion of tax and penalties from more than 45,000 taxpayers.¹⁴

The 2012 OVDP, like its predecessors, excuses taxpayers from criminal prosecution and fraud penalties but requires the assessment of substantial understatement penalties under Sec. 6662 as well as interest on any deficiency. Under each iteration of the OVDP, taxpayers were required to file amended returns for a period of six to eight years (depending on the program), file all delinquent FBARs, and submit any information returns or schedules required in connection with the taxpayer’s overseas assets.

In lieu of all other penalties attributable to the undisclosed foreign accounts, assets, and entities, including FBAR and offshore-related information return penalties and tax liabilities for years prior to the voluntary disclosure period, participating taxpayers pay a “miscellaneous offshore penalty” calculated on the highest aggregate balance of the taxpayer’s assets during any single year covered by the disclosure period. Regardless of the taxpayer’s culpability, this penalty started at 20% under the 2009 OVDP and escalated to 27.5% under the 2012 OVDP, subject to certain rare exceptions.

In September 2012, the IRS supplemented the 2012 OVDP with a “streamlined” disclosure procedure for individuals who had failed to file income tax returns and had resided outside the United States since Jan. 1, 2009.¹⁵ In those cases, an individual needed to file three years of back tax returns rather than eight, as generally required by the 2012 OVDP. But to avoid penalties under the streamlined procedures, individuals had to show themselves to be a “low compliance risk,” based upon factors such as their not conducting business in the United States, reporting income in their country of residence, and a lack of “sophisticated tax planning or avoidance.”¹⁶ Most important, if an individual was rejected for the streamlined option because he or she was found to be a “high compliance risk,” the general OVDP alternative with its protections against criminal prosecution was unavailable.¹⁷

Eligibility for Revised Streamlined Procedure

In June 2014, the IRS made sweeping changes to its offshore initiative to allow most taxpayers who had not willfully failed to disclose foreign accounts and income to use the streamlined procedures and mitigate the penalties for making a disclosure. The Service jettisoned the streamlined procedures in the traditional OVDP, replacing them with a set of revised streamlined procedures, the Streamlined Domestic Offshore Procedures (domestic streamlined procedures) available to individuals living in the United States and Streamlined Foreign Offshore Procedures (foreign streamlined procedures) available to individuals living outside the country.¹⁸ In lieu of an analysis of whether the individual is a high or low compliance risk, the revised streamlined procedures call for the individual to declare under penalties of perjury that the failure to report income, pay tax, and submit all required information forms, including FBARs, was due to negligence or other mistake that arose from a good-faith misunderstanding of the law.¹⁹ Finally, to be eligible for the revised streamlined procedures, at the time of application, the individual must not be under IRS examination, without regard to whether the audit relates to undisclosed foreign assets or income.

Unlike under the OVDP, the IRS will neither acknowledge nor necessarily audit any tax returns filed under the revised streamlined procedures, so that the process will not culminate in the signing of a closing agreement. Of course, tax returns submitted may be audited to verify their accuracy and completeness, which may require the taxpayer to submit bank statements or other information from foreign financial institutions.

Taxpayers Residing Outside the United States

If an individual meets the above eligibility criteria, the streamlined foreign procedures permit individuals who qualify as nonresidents who have not reported the existence of and/or income from a foreign financial asset to avoid all penalties in connection with the failure. The rules that apply in determining if an individual is a nonresident eligible to use the foreign streamlined procedures depend on whether or not the individual is a U.S. citizen or lawful permanent resident.

U.S. citizens and lawful permanent residents: For purposes of the streamlined procedures, U.S. citizens and lawful permanent residents, i.e., green card holders, are nonresidents if, in one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, they (1) did not have an abode in the United States and (2) were physically outside the United States for at least 330 full days.

Adopting principles from the foreign earned income exclusion of Sec. 911, the foreign streamlined procedures provide that neither temporary presence nor maintaining a dwelling in the United States establishes an abode in the country. The foreign streamlined procedures define “abode” via reference to an IRS publication:

“Abode” has been variously defined as one’s home, habitation, residence, domicile, or place of dwelling. It does not mean your principal place of business. “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home.” The location of your abode often will depend on where you maintain your economic, family, and personal ties.²⁰

Not U.S. citizens or lawful permanent residents: Individuals who are not U.S. citizens or lawful permanent residents are not residents for purposes of the foreign streamlined procedures if, in any one or more of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, they did not meet the substantial-presence test of Sec. 7701(b)(3). Under this test, subject to certain exceptions, if the individual is present in the United States for at least 31 days during the year and the sum of the days of presence in that year plus one-third of the days present in the immediately preceding year and one-sixth of the days present in the second preceding year is at least 183, then the individual is considered a resident for the year (the substantial-presence test).²¹

Some individuals who are resident for purposes of the income tax will be nonresidents under the foreign streamlined procedures.

Example 1: X was born in the United States but moved to a foreign country when he was 5 years old, has lived there ever since, and does not have a U.S. abode. Although X, being a U.S. citizen, remains a resident for income tax purposes, he is a nonresident for purposes of the revised streamlined procedures.

Example 2: Assume the same facts as Example 1, except that X returns to the United States and acquires a U.S. abode in the current year, after the due date for his U.S. tax return for the prior year, for which he did not file for an extension. Because X does not meet the substantial-presence test of Sec. 7701(b)(3) in one of the last three years for which his U.S. tax return due date (or properly applied for extended due date) has passed, he remains a nonresident for purposes of the streamlined procedures for the current year.

Example 3: Y is neither a U.S. citizen nor a green card holder but moves to the United States in the current year and was present in the United States for more than 183 days in the current year. While Y meets the substantial-presence test under Sec. 7701(b)(3) for the current year and is a resident for income tax purposes, she does not meet the substantial-presence test for at least one of the last three years for which the U.S. tax return due date (or properly applied for extended due date) has passed and is therefore a nonresident under the streamlined procedures for the current year.

If the citizen or green card holder is a nonresident under the foreign streamlined procedures, the individual (and the individual’s spouse if a joint return is filed)²² wishing to disclose offshore assets and income under the procedures must then:

• File delinquent or amended tax returns for each of the most recent three years for which return(s) were required and for which the U.S. tax return due date (or properly applied for extended due date) has passed. The returns should include all required international information forms, even if those forms would be filed separately from Form 1040 if the individual had filed on time or had filed a complete and accurate original return.²³
• Write in red at the top of the first page of each return, “Streamlined Foreign Offshore” to alert the IRS that the submission should be processed using the streamlined procedures.
• Complete and sign IRS Form 14653, Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures, on which the taxpayer certifies that he or she is eligible for the streamlined procedures and has filed all required FBARs and that the failure to file tax returns, report all income, pay all tax, and submit all required information returns, including FBARs, resulted from nonwillful conduct. The individual must also provide on Form 14653 (or on a signed attachment) a detailed narrative statement describing the specific reasons for the taxpayer’s failure to report all income, pay all tax, and submit all required information returns. In this statement, a taxpayer who relied on a professional adviser must give the adviser’s name and contact information as well as a summary of the advice received.
• Submit payment of all tax and interest due with each return, noting the taxpayer’s identification number on the check.
• If the individual is not eligible for a Social Security number and does not have an individual taxpayer identification number (ITIN), submit an application for an ITIN.
• E-file delinquent FBARs for each of the most recent six years for which the FBAR due date has passed, using the BSA E-Filing System. On the cover page of the electronic form, select “other” as the reason for filing late, and in the explanation box that opens, enter “Streamlined Filing Compliance Procedures.”²⁴
• If desired, where permitted by treaty, request an extension of time to make an election to defer income from certain retirement or savings plans.²⁵
• Send all documents, except the FBAR submissions, together with any payment, in paper form to:

Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741

If the IRS finds that the taxpayer has met the above requirements, he or she will not be subject to penalties with respect to the returns and FBARs submitted. This waiver of all penalties applies even if the IRS subsequently selects the taxpayer’s returns for examination, unless the audit results in a determination that the original noncompliance was fraudulent and/or that the FBAR violation was willful.

Taxpayers Residing in the United States

As previously mentioned, residents of the United States may be eligible to use the revised streamlined procedures. Individuals meeting the general eligibility criteria for the revised streamlined procedures (i.e., failures were nonwillful and the taxpayer is not under IRS examination) may use the domestic streamlined procedures if they have previously filed U.S. tax returns for each of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed (the covered return period). Residents who have failed to file returns in prior years cannot use the domestic streamlined procedure.

In this case, a U.S. resident may avoid criminal prosecution and all civil penalties other than a flat 5% penalty based on the highest year-end value of the financial assets the individual failed to report on Form 8938 for the covered return period or on an FBAR for each of the most recent six years for which the FBAR due date has passed (the covered FBAR period). Even if the taxpayer properly disclosed an asset, the 5% penalty still applies if the taxpayer failed to report the income from the asset. Thus, if an asset was omitted from Form 8938 or the taxpayer failed to report income from the asset (even if the asset was disclosed), the 5% penalty is applied to the asset’s highest year-end value. However, unlike the OVDP, the penalty base for the streamlined procedures does not include assets that the taxpayer is not required to report on either Form 8938 or an FBAR. Thus, no penalty is imposed on unreported foreign real estate that is not held through an unreported foreign entity.

Example 4: A taxpayer has two unreported offshore accounts with the year-end balances shown in the exhibit below. Only account X earns interest. If the taxpayer discloses the accounts in year 7, FBARs are required for years 1-6 and amended tax returns for years 4-6. The 5% penalty is imposed on the highest aggregate year-end balance ($1,950,000) in year 6.

Resident individuals seeking to use the domestic streamlined procedures must:

• File amended tax returns for each of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed.
• Include all required international information forms, even if those forms would not normally be filed with a Form 1040 if the individual were filing a complete and accurate original return.
• Write in red at the top of the first page of each amended return, “Streamlined Domestic Offshore” to alert the IRS that the submission should be processed using the special procedures.
• Complete and sign a Form 14654, Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures, on which the taxpayer certifies eligibility for the revised streamlined procedures, that all FBARs have been filed, that the failure to report all income, pay all tax, and submit all required information returns, including FBARs, resulted from nonwillful conduct, and that the miscellaneous offshore penalty amount being submitted is accurate. The form requires reporting of the taxpayer’s foreign financial assets, including account numbers, the date each account was established, and the year-end value of each account in the covered tax return period or the covered FBAR period. Like Form 14653, Form 14654 calls for a detailed narrative of the facts giving rise to the taxpayer’s failure to report all foreign-source income, including the name and address of any professional adviser who assisted in the failure to file or report foreign assets and/or income, and a summary of the advice received.
• Submit payment of all tax and interest due with the amended returns, along with the 5% penalty. The individual’s Social Security number must be included on the payment check.
• E-file delinquent FBARs for each of the most recent six years for which the FBAR due date has passed, using the BSA E-Filing System. On the cover page of the electronic form, the individual should select “other” as the reason for filing late and, in the explanation box that opens, enter “Streamlined Filing Compliance Procedures.”
• If desired and where permitted by treaty, request an extension of time to make an election to defer income from certain retirement or savings plans.
• Send all documents (except the FBAR submission), together with any payments due, in paper form to:

Internal Revenue Service3651 South I-H 35Stop 6063 AUSCAttn: Streamlined ­Domestic Offshore Austin, TX 78741

Delinquent FBAR Filings

Where the taxpayer reported the income and paid the income tax on all foreign financial assets but failed to report foreign financial accounts on FBARs, the revised streamlined procedures permit filing delinquent FBARs without penalty if the IRS is not auditing the individual and the IRS has not contacted him or her about the missing FBARs. Because there is an absolute six-year statute of limitation for a failure to file an FBAR from the due date of the form,²⁶ for 2015, delinquent FBARs are only required for 2009-2014.

Using the BSA E-Filing System, the taxpayer should select the FBAR submission option “other,” which will open a window where the individual states that the criteria for penalty relief have been met, i.e., that all income and taxes related to the foreign account(s) have been reported and that the taxpayer has not been contacted by the IRS.

Delinquent International Information Forms

Where an individual has properly filed returns and paid income tax on all foreign assets, including filing all FBARs, but failed to file one or more required information forms, the taxpayer may request penalty abatement for failure to attach one or more of these forms to his or her return. The taxpayer must not have been contacted about the delinquent forms or otherwise be under IRS examination. A statement of the facts establishing reasonable cause for the failure and indicating that the taxpayer was not engaged in tax evasion must be attached to each information return being submitted. The delinquent information forms, except for Forms 3520 and 3520-A (which are filed separately according to the instructions for those forms), should be attached to an amended return filed in accordance with the amended return’s instructions.

Offshore Voluntary Disclosure Program

Finally, if the taxpayer chooses not to employ the streamlined procedures, he or she may still seek relief from criminal penalties and substantial civil penalties under the general provisions of the 2012 OVDP, as modified by the June 2014 notice.²⁷ As noted, taxpayers electing the OVDP can avoid criminal and civil penalties for failing to report income from foreign assets or to disclose foreign assets on information returns or FBARs.²⁸ The OVDP requires the taxpayer to file amended returns (or original returns if not previously filed), as well as any delinquent information returns or FBARs for eight years. In addition to requiring payment of all taxes, interest, and a Sec. 6662 accuracy penalty on unreported income, the OVDP imposes an additional penalty of 27.5% or, in certain circumstances, 50% on the highest aggregate balance of the taxpayer’s offshore assets over the disclosure period.²⁹ While the penalties of the 2012 OVDP are considerable, they are often substantially less than the criminal and civil penalties applicable outside the program.

Practical Considerations

The revised streamlined procedures are a welcome development for taxpayers who inadvertently failed to disclose offshore assets or report income from them. As noted, the penalties are substantially less than the statutory penalties or the higher penalty structure associated with the traditional OVDP, with some taxpayers avoiding penalties entirely. In addition, for taxpayers with small accounts and less complex filings, the revised streamlined procedures will result in significantly lower legal and accounting fees, due both to the reduced lookback period and the less formal procedures than under the traditional OVDP.

However, these revised procedures are not for everyone with unreported offshore accounts.³⁰ The prospect of reduced penalties and professional costs must be balanced against the potential criminal exposure and larger civil penalties if the taxpayer’s revised streamlined disclosure request is rejected. In this regard, although proving that the taxpayer did not willfully avoid reporting the assets and/or income is critical, it can be difficult, as the taxpayer often has only circumstantial evidence available.

The Internal Revenue Manual (IRM) defines willfulness as a “voluntary, intentional violation of a known legal duty.”³¹ Willfulness is shown not only by knowledge of reporting requirements and a conscious decision not to comply but also where individuals purposefully choose not to be aware of their reporting responsibilities. Specifically, the IRM states:

Under the concept of “willful blindness” willfulness is attributed to a person who made a conscious effort to avoid learning about the FBAR reporting and recordkeeping requirements.

Example: Willful blindness may be present when a person admits knowledge of, and fails to answer questions concerning, his interest in or signature or other authority over financial accounts at foreign banks on Schedule B of his Federal income tax return. This section of the income tax return refers taxpayers to the instructions for Schedule B, which provides guidance on their responsibilities for reporting foreign bank accounts and discusses the duty to file the FBAR. These resources indicate that the person could have learned of the filing and recordkeeping requirements quite easily. It is reasonable to assume that a person who has foreign bank accounts should read the information specified by the government in tax forms. The failure to act on this information and learn of the further reporting requirement, as suggested on Schedule B, may provide evidence of willful blindness on the part of the person.

Note: The failure to learn of the filing requirements coupled with other factors, such as the efforts taken to conceal the existence of the accounts and the amounts involved, may lead to a conclusion that the violation was due to willful blindness. The mere fact that a person checked the wrong box, or no box, on a Schedule B is not sufficient, in itself, to establish that the FBAR violation was attributable to willful blindness.³²

While taxpayers may look to case law as a guide for what constitutes willful behavior, the revised streamlined procedures remain an administrative program where, unlike judicial determinations, the burden of proof regarding the taxpayer’s conduct falls on the taxpayer, not the government, as is the usual case in matters involving fraud. This is an important distinction because the taxpayer is left to demonstrate a lack of intent to avoid filing responsibilities, i.e., that the taxpayer was unaware of the obligation to file a return or report the offshore income or asset. Absent independent evidence, such as a statement from a tax professional advising that the filing or reporting was not required, the taxpayer is faced with a difficult threshold of proof.

Two cases that have addressed the burden-of-proof issue with respect to fraud for failure to file FBARs adopted a “preponderance of the evidence” standard for establishing whether the individual’s failure to file an FBAR was willful, rejecting a higher standard such as “clear and convincing evidence.”³³ However, while the taxpayer’s burden to show his or her failure to report the foreign accounts was not willful is generally less than that for most issues involving fraud, the questions on Schedule B regarding the taxpayer’s responsibility to disclose those accounts still make meeting that standard a difficult, but not insurmountable, challenge.

Compounding this problem, the IRS refuses to provide specific guidance with respect to when a taxpayer’s conduct will be found to be nonwillful for purposes of the streamlined procedures. On an American Bar Association webcast, John C. McDougal, a senior special trial attorney in the IRS Office of Chief Counsel, stated that there is “not going to be anything further on that,” i.e., what constitutes nonwillful conduct under the streamlined procedures.³⁴ McDougal stated that substantial case law illustrates willfulness, enabling taxpayers to determine if their conduct is not willful.

While the case law on willfulness with respect to fraud is considerable, as a practical matter, rebutting a claim by the IRS in court that a taxpayer’s conduct was willful is much different from establishing to the satisfaction of the IRS under the revised streamlined procedures that the taxpayer acted nonwillfully. Therefore, taxpayers seeking relief under the revised streamlined procedures should expect substantial IRS scrutiny on the issue of willfulness and be prepared to address whether their tax return preparer inquired about their foreign financial assets, particularly if the foreign accounts or the income from them are sizable or the accounts are held in foreign entities owned by the taxpayer.

In addition, because there is no appeal right if the IRS rejects the taxpayer’s streamlined submission, the taxpayer faces the prospect of a full examination after having voluntarily disclosed significant information, as well as the possible waiver of attorney-client privilege in connection with any advice given about the submission. Most significantly, if the IRS rejects a revised streamlined disclosure request, the taxpayer may not fall back on the traditional OVDP.³⁵ Furthermore, the IRS refuses to entertain requests for preclearance of possible submissions or other placeholders in anticipation of making a streamlined request.³⁶ In short, taxpayers and their advisers must carefully consider whether to employ the revised streamlined procedures.

Finally, although a discussion of this consideration is beyond the scope of this article, taxpayers who have failed to file returns or report income for several years should consider retaining an attorney, who may invoke the attorney-client privilege. While Sec. 7525 provides such a privilege with respect to certain accountant-client communications, the full extent of this privilege is unclear. And even when an attorney is retained, communications in connection with reporting amounts on tax returns are not necessarily confidential.³⁷ On the other hand, a communication made to an accountant retained by an attorney to assist in rendering legal advice may be privileged in certain circumstances.³⁸ The challenge in streamlined filing cases where an attorney is retained will be parsing those communications to the accountant that are limited to return preparation from those dealing with general legal advice.³⁹

Conclusion

With increased enforcement of reporting provisions governing the disclosure of foreign assets, taxpayers wishing to use the revised streamlined provisions should act promptly, as eligibility for penalty relief depends upon the taxpayer’s taking corrective action before being contacted by the IRS. For qualifying taxpayers, the steps described in this article and the advantages the streamlined procedures offer over other alternatives to disclose foreign assets and income should help taxpayers achieve compliance while minimizing or avoiding penalties.  

Footnotes

¹IRS News Release IR-2014-73. See IRS webpage, “Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers 2014,” available at www.irs.gov.

²For articles addressing other options available to individuals who have failed to report income from foreign financial assets, see Ward, “2012 Offshore Voluntary Disclosure Program: Issues and Opportunities,” 41 Tax Mgmt. Int’l. J. 548 (2012), and Ward, “Offshore Voluntary Disclosure Program Round Four: IRS Announces Further Changes to Encourage Broader Compliance,” 43 Tax Mgmt. Int’l. J. 604 (2014).

³In addition to civil penalty relief, because almost all criminal tax statutes require “willfulness” by the taxpayer, qualifying under the streamlined procedures will effectively excuse the taxpayer from criminal prosecution.

⁴IRS webpage, “2012 Offshore Voluntary Disclosure Program,” available at www.irs.gov.

⁵Financial Recordkeeping and Reporting of Currency and Foreign Transactions Act of 1970 (Bank Secrecy Act), P.L. 91-508, codified at 31 U.S.C. §1051 et seq.

⁶31 U.S.C. §5314 and 31 C.F.R. §1010.306(c).

⁷Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, P.L. 114-41, §2006(b)(11). For previous reporting years, the due date was on or before June 30 of the following tax year.

⁸31 U.S.C. §5321(a)(5)(B)(i).

⁹31 U.S.C. §5321(a)(5)(C).

¹⁰See Velarde, “FBAR Penalty Cap Reflects Sensitivity to U.S. Constitutional Concerns,” 2015 WTD 105-4 (June 2, 2015), citing IRS Memorandum SBSE-04-0515-0025.

¹¹IRS News Release IR-2009-84.

¹²IRS News Release IR-2011-14.

¹³IRS News Release IR-2012-64.

¹⁴Statement of IRS Commissioner John Koskinen, available at www.irs.gov.

¹⁵IRS News Release IR-2012-65 and IRS questionnaire and instructions.

¹⁶Id.

¹⁷Id.

¹⁸IRS News Release IR-2014-73.

¹⁹Specifically, IRS webpages (available at www.irs.gov and www.irs.gov) define nonwillful conduct as “due to negligence, inadvertence, or mistake or conduct that is the result of good faith misunderstanding of the requirements of the law.”

²⁰IRS webpage available at www.irs.gov, referring to IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, page 12 (Dec. 14, 2014).

²¹Sec. 7701(b)(3)(A). The individual will meet the test for any calendar year if he or she is present in the United States for 183 days during that year.

²²Under these standards, even though an individual and spouse might file a joint income tax return, one spouse might be resident and the other spouse nonresident under the foreign streamlined procedures.

²³E.g., Form 8938, Statement of Specified Foreign Financial Assets; Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund; Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations; Form 5472, Information Return of a 25% Foreign-Owned U.S. Corporation or a Foreign Corporation Engaged in a U.S. Trade or Business; Form 3520, Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts; Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner (Under Section 6048(b)); Form 926, Filing Requirement for U.S. Transferors of Property to a Foreign Corporation; Form 8858, Information Return of U.S. Persons With Respect to Foreign Disregarded Entities; and Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships.

²⁴File FBARs by registering and linking to the BSA E-Filing System page available at bsaefiling.fincen.treas.gov.

²⁵Rev. Proc. 2014-55 allows U.S. citizens and residents who participate in certain Canadian retirement plans to elect under the U.S.—Canada income tax treaty to defer U.S. income tax on income accruing in their plans until a distribution is made. See Form 8891, U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans, and Article XVIII(7) of the U.S.—Canada income tax treaty.

²⁶31 U.S.C. §5321(b).

²⁷IRS webpage, “Offshore Voluntary Disclosure Program Frequently Asked Questions and Answers 2014,” available at www.irs.gov.

²⁸E.g., Sec. 6038D (failure to file Form 8938); Sec. 6048 (failure to file Forms 3520 and 3520-A); Secs. 6035, 6038, and 6046 (failure to file Form 5471); Secs. 6038A and 6038C (failure to file Form 5472); Sec. 6038B (failure to file Form 926); and Secs. 6038, 6038B, and 6046A (failure to file Form 8865).

²⁹The 50% penalty is imposed if the government has taken public enforcement action against the financial institution holding the account(s).

³⁰For a discussion of when taxpayers might “roll the dice” and make a “quiet” disclosure by simply filing amended returns over the period for which the statute of limitation is open, see Greaves and Wu, “Quietly Finding a Home in the Voluntary Disclosure World,” 148 Tax Notes 207 (July 13, 2015).

³¹IRM §4.26.16.6.5.1(1) (Nov. 6, 2015).

³²IRM §4.26.16.6.5.1(5) (Nov. 6, 2015).

³³Williams, 489 Fed. Appx. 655 (4th Cir. 2012); McBride, No. 2:09-cv-378DN (D. Utah 11/8/12).

³⁴Bennett, “No Willful Conduct Definition for Streamlined Offshore Disclosure Program, Official Says,” BloombergBNA Daily Tax Report, G-11 (Feb. 25, 2015).

³⁵IRS webpage, “Streamlined Filing Compliance Procedures,” available at www.irs.gov.

³⁶Velarde, “Official Highlights Problem Trends in Streamlined Submissions,” 2015 TNT 123-7 (June 26, 2015).

³⁷Colton, 306 F.2d 633 (2d Cir. 1962), cert. denied, 371 U.S. 951 (1963) (workpapers prepared in connection with filing amended returns are not privileged, even though the accountant was employed by the taxpayer’s attorney to prepare amended returns); Abrahams, 905 F.2d 1276 (9th Cir. 1990) (communications made solely for tax return preparation are not privileged, while communications concerning legal advice about what to report on the return may be privileged).

³⁸Kovel, 296 F.2d 918 (2d Cir. 1961).

³⁹For an exhaustive discussion of the attorney-client privilege in the context of communications involving accountants, see Saltzman, IRS Practice and Procedure ¶13.11[1] (Warren, Gorham & Lamont 2002).