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Streamlined Filing Compliance Procedures for U.S. Taxpayers Residing Outside the United States Frequently Asked Questions and Answers

Effective On or After July 1, 2014

# Questions Answers
Q1. The discussion of the non-residency requirement for eligibility for the Streamlined Foreign Offshore Procedures refers to IRC § 911 and its regulations.  Does that mean that anyone who is non-resident under IRC § 911 and its regulations is non-resident for purposes of the Streamlined Foreign Offshore Procedures? No.  The reference to IRC § 911 and its regulations is only to the parts of those authorities that define “abode,” which are found in IRC § 911(d)(3) and Treas. Reg. § 1.911-2(b).  Non-residency for purposes of the Streamlined Foreign Offshore Procedures is defined in those procedures, and not in IRC § 911 and its regulations.
Q2.

I have a Canadian registered retirement savings plan (RRSP), registered retirement income fund (RRIF), or other similar Canadian retirement plan. I am an “eligible individual” as defined in § 4.01 of Rev. Proc. 2014-55. Under the procedures in effect prior to the issuance of Rev. Proc. 2014-55, I did not make a timely election under Article XVIII(7) of the U.S.–Canada income tax treaty to defer U.S. income tax on undistributed income earned by my Canadian retirement plan.

How should I report my Canadian retirement plan with my Streamlined submission?

Under § 4.02 of Rev. Proc. 2014-55, you are treated as having made the election. See Rev. Proc. 2014-55, § 7. In the narrative statement of facts on Form 14653, please state that you are an “eligible individual” under Rev. Proc. 2014-55.

You may need to report your Canadian retirement plan on FBARs or Forms 8938. Please refer to the instructions for these forms for more information.

Q3.

Same facts as FAQ 2 except I am not an “eligible individual” because I failed to satisfy the requirement for filing a U.S. Federal income tax return for each tax year during which I was a U.S. citizen or resident as required by § 4.01 B) of Rev. Proc. 2014-55. Also, I meet requirements under § 4.01 A), C), and D) of Rev. Proc. 2014-55.

How should I report my Canadian retirement plan with my Streamlined submission?

If you submit income tax returns through the Streamlined Foreign Offshore Procedures, you will be afforded relief consistent with Rev. Proc. 2014-55 for the tax years included in your submission. In the narrative statement of facts on Form 14653, please state that you have met the other requirements to be an “eligible individual” under § 4.01 of Rev. Proc. 2014-55. See § 4.01 A), C), and D) of Rev. Proc. 2014-55.

You may need to report your Canadian retirement plan on FBARs or Forms 8938. Please refer to the instructions for these forms for more information.

Q4.

Same facts as FAQ 2 except I am not an “eligible individual” because I reported as gross income on a U.S. Federal income tax return some or all of the accrued but undistributed earnings in my Canadian retirement plan. See § 4.01 C) of Rev. Proc. 2014-55. But I now realize I could have deferred the tax on the accrued but undistributed earnings in my Canadian retirement plan. Additionally, I have other tax compliance issues that need to be corrected through a Streamlined submission.

How do I correct my reporting of accrued but undistributed earnings in my Canadian retirement plan?

If you submit amended U.S. Federal income tax returns through the Streamlined Foreign Offshore Procedures and meet the requirements discussed below, you will be afforded relief consistent with Rev. Proc. 2014-55 for the tax years included in your submission.

This procedure is not available if you reported as gross income on a U.S. Federal income tax return accrued but undistributed earnings in a Canadian retirement plan for one or more tax years beyond the scope of your Streamlined submission. Additionally, this procedure is not available if you failed to report any and all distributions received from the plan as if you had made an election under Article XVIII(7) of the U.S.–Canada income tax treaty. See § 4.01 D) of Rev. Proc. 2014-55. In these cases, you must seek the consent of the Commissioner as directed under § 4.04 of Rev. Proc. 2014-55.

In the narrative statement of facts on Form 14653, please state that you have met the other requirements to be an “eligible individual” under § 4.01 of Rev. Proc. 2014-55. See § 4.01 A), B), and D) of Rev. Proc. 2014-55. Please also state that the reporting of accrued but undistributed earnings was limited to the tax years in your Streamlined submission.

You may need to report your Canadian retirement plan on FBARs or Forms 8938. Please refer to the instructions for these forms for more information.

Q5.

Same facts as FAQ 2 except I am not an “eligible individual” because I reported as gross income on a U.S. Federal income tax return some or all of the accrued but undistributed earnings in my Canadian retirement plan. See  § 4.01 C) of Rev. Proc. 2014-55. But I now realize I could have deferred the tax on the accrued but undistributed earnings in my Canadian retirement plan. Additionally, I have no other tax compliance issues that need to be corrected through a Streamlined submission.

How do I correct my reporting of accrued but undistributed earnings in my Canadian retirement plan?

You should not use the Streamlined Foreign Offshore Procedures because you have no tax compliance issues beyond reporting accrued but undistributed earnings in your Canadian retirement plan. Therefore, you should follow normal procedures for filing amended income tax returns or seek the consent of the Commissioner as directed by § 4.04 of Rev. Proc. 2014-55.

You may need to report your Canadian retirement plan on FBARs or Forms 8938. Please refer to the instructions for these forms for more information.

Q6.

What facts do I need to include in completing the narrative statement of facts portion of the Form 14653?

Provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Include the whole story including favorable and unfavorable facts. Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs. Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/management decisions. Provide a complete story about your foreign financial account/asset.

The following points address common situations that may apply to you:

  • We realize that many taxpayers failed to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, simply provide your explanation.

  • We realize that some taxpayers that owned or controlled a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) failed to properly report ownership of the entity or transactions with the foreign entity. If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, explain why and include your understanding of your reporting obligations to the IRS and to foreign jurisdictions.

  • If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.

  • If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.

Q7.

In one or more of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed, I filed joint income tax returns. But my spouse/former spouse will not sign joint amended returns or a joint certification on Form 14653 for a Streamlined submission. What can I do? Am I precluded from using the Streamlined Foreign Offshore Procedures?

We understand that in certain cases (including but not limited to separation or divorce), your spouse/former spouse may not be willing to sign joint amended income tax returns or a joint certification on Form 14653.

You may submit a joint amended income tax return with only your signature to Streamlined Foreign Offshore Procedures so long as your joint amended return shows a net increase in tax. Please explain your inability to secure your spouse’s/former spouse’s signature in the narrative statement of facts on Form 14653. And write “SFO FAQ 7” in red ink in the area for your spouse’s signature on the amended returns and Form 14653.

As a matter of routine processing, the Service will request the other spouse’s signature on joint amended returns with only one signature. If at the time the Service makes a request for your spouse’s/former spouse’s signature on a joint amended return or joint certification you are still unable to secure your spouse’s/former spouse’s signature, please respond to the inquiry by referencing this FAQ.

You may not submit a joint amended income tax return with only your signature to Streamlined Foreign Offshore Procedures showing a net decrease in tax or an increase in credit.

Q8.

Who can I contact if I have general questions about the terms of the Streamlined Filing Compliance Procedures or completing Form 14653?

If you have questions about the terms the Streamlined Filing Compliance Procedures or completing Form 14653, you may contact the OVDP Hotline at (267) 466-0020.

The OVDP Hotline will not provide case-specific or legal advice.

Q9. I realized that I made a mistake in my submission to the Streamlined Filing Compliance Procedures. How do I correct my mistake?

If you made a mistake in your submission to the Streamlined Filing Compliance Procedures and your returns previously submitted are not under examination, you may correct the error by providing amended returns and/or an amended Form 14653. On the top of the certification form, write “amended” in red ink, and on the top of the first page of each corrected amended tax return write "Amended Streamlined Foreign Offshore" in red ink. Explain all facts and circumstances concerning the error in the original Streamlined submission. See SFO FAQ 6 for relevant information to provide.

Mail the amended submission to:

IRS
3651 S. IH 35
MS 6063 AUSC
Attn.: Streamlined Procedures
Austin, TX 78741

Example 1 (amended tax returns and amended Form 14653): The taxpayer made an SFO submission on February 1, 2016, and she just realized she failed to address a foreign financial asset in the narrative statement of facts on Form 14653. Additionally, she failed to include income from that foreign financial asset on her Forms 1040 for the tax periods in her Streamlined submission, tax years 2012, 2013, and 2014. She must provide amended income tax returns for tax years 2012, 2013, and 2014, an amended Streamlined certification on Form 14653, and payment for increases in tax and interest. The amended Form 14653 must include all facts and circumstances concerning the error in the original Streamlined submission. Additionally, if the taxpayer made a mistake in filing her FBARs with FinCEN, she must efile amended FBARs with FinCEN.

Example 2 (amended Form 14653 only): The taxpayer made an SFO submission on February 1, 2016, and she just realized she failed to address a foreign financial asset in the narrative statement of facts on Form 14653. She fully reported all income from the foreign financial asset on her income tax returns in her original Streamlined submission. She must provide an amended Streamlined certification on Form 14653 including all facts and circumstances concerning the error in the original Streamlined submission. Additionally, if the taxpayer made a mistake in filing her FBARs with FinCEN, she must efile amended FBARs with FinCEN.

Q10. I am eligible for a Social Security Number (SSN) but do not have one at this time. May I make a submission to the Streamlined Filing Compliance Procedures without an SSN? If I make a submission without an SSN, what are the consequences? If you are eligible for an SSN but do not have one, you may not use the Streamlined Filing Compliance Procedures. The terms of the Streamlined Filing Compliance Procedures require a valid Taxpayer Identification Number (TIN). For U.S. citizens, resident aliens, and certain other individuals, the proper TIN is a valid SSN. If you make a submission to the Streamlined Filing Compliance Procedures without a valid SSN, then the IRS may process your returns after assigning an IRSN. See IRM 3.13.5.70 and 3.13.5.71. But taxpayers that make submissions to the Streamlined Filing Compliance Procedures without valid SSNs are not eligible for the favorable penalty provisions of the Streamlined Filing Compliance Procedures. The IRS will process such returns subject to penalties applicable outside of the Streamlined Filing Compliance Procedures.

 

Page Last Reviewed or Updated: 09-Sep-2016