[US Taxpayers] Streamlined Filing Compliance Procedures
2022. 1. 10.
Please note that the streamlined filing compliance procedures (“streamlined procedures”) are available to US taxpayers certifying that their failure to report foreign financial assets and pay all tax due in respect of those assets did not result from willful conduct on their part.
It is common that Korean citizens who also hold a US “green card” do not realize that their US permanent resident status continues after leaving the US, even if they physically and legally become residents of Korea. They might have unknowingly failed to comply with US tax compliance while fully complied with Korea tax compliance. Since the IRS routinely receives financial and tax information from many sources, they might face significant US tax and penalty exposures
If the IRS identifies and contacts the taxpayer first, generally favorable programs like the streamlined procedures are not available, and the taxpayer could be under an IRS audit or examination. In this case, even if it is because of issues unrelated to the streamlined procedures, the taxpayer is under obligation to update the auditor about the unreported foreign assets. Therefore, it is critically valuable for the taxpayer to take affirmative self-correction.
Under the streamlined procedures, the taxpayer needs to file only three prior years of tax returns, rather than all delinquent prior year returns. And, the taxpayer might qualify for significant tax penalty relief, including potentially the reduction of all tax penalties. For your information, entering the streamlined procedures does not increase the chance of an audit. The streamlined procedure does not provide criminal protection, however if the taxpayers are not non-willful, then the taxpayers are not at risk for any IRS Special Agent investigation or criminal prosecution.
It is important to note that the streamlined procedures are only available to taxpayers having compliance failures attributable to non-willful conduct. In this regard, the taxpayers are required to submit a certified statement about the reasons why they have failed under the penalty of perjury. The taxpayers are also required to file six prior years of Foreign (non-US) Bank Account Reports ("FBAR").
Please note that it is unknown if and when the IRS might discontinue the streamlined procedures, as it did with the other programs (like "Offshore Voluntary Disclosure Program"). Therefore, US citizens or "US green card" holders who have failed to file US tax returns should consider participating in the streamlined procedures.