Internal Revenue Service Amnesty Programs

November 17, 2015

In 2014, the IRS announced changes to its programs to help delinquent taxpayers file U.S. tax returns. We blogged about the changes to the Streamlined Foreign Offshore Procedures and Streamlined Domestic Offshore Procedures before; you can click to read our blog Internal Revenue Service Announces Changes to Streamlined Programs.

The IRS has also created a program to assist taxpayers who don’t need to use these programs but has not filed international information disclosures on a timely basis. Known as “Delinquent International Information Return Submission Procedures”, the program assist taxpayers who meet the following conditions:

  • have not filed one or more required international information returns,
  • have reasonable cause for not timely filing the information returns,
  • 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

Penalties of up to US$10,000 per year per form can be assessed for failure to timely file certain information forms. The program can assist taxpayers who realize they should have filed certain international US tax forms such as IRS Form 5471 (interests in non-U.S. corporations), and IRS Form 3520 (beneficial interest in a non-U.S. trust). Where the IRS accepts the taxpayer’s explanation of reasonable cause, no penalties will be assessed.

Taxpayers are required to attach explanations to each information form describing how they meet the tests for reasonable cause and certifying that the entity involved in the delinquency was not engaged in tax evasion. It is up to the IRS to determine whether a taxpayer meets the criteria for reasonable cause and/or whether the return will be subject to audit.

The Delinquent International Information Return Submission Procedures can be an effective program for taxpayer to meet past U.S. tax return requirements. We have experience with this program and can discuss it further with you to see if it can apply and assist you with your situation.