Members of wealthy Australian families who relocate to the US, or members of US-based families moving to Australia, are often doing so without being fully aware of, or advised about, the stringent reporting and filing requirements on foreign assets, financial accounts and holdings they will be subject to on becoming a US person for tax purposes. This invariably results in the taxpayer seeking to enter into a remediation program to limit or mitigate penalty exposure on misreporting and non-compliance with the IRS.

Deciding which program is best for a taxpayer is imperative and can now result in further penalty exposure where a lack of analysis of the facts and circumstances surrounding the non-compliance is conducted. Prior to entering into a remediation program, a taxpayer should seek a comprehensive analysis of their particular circumstances and an analysis of which program is the most appropriate for them.

The remediation options include following procedures/program:

  • Streamlined Procedures – including the Streamlined Domestic Offshore Procedures (SDOP) and the Streamlined Foreign Offshore Procedures (SFOP); and
  • Updated Voluntary Disclosure Program (UVDP).

A taxpayer will be ineligible for any of the remediation options if:

  • the taxpayer is already under examination or investigation by the IRS or a law enforcement agency; or
  • the taxpayer has been notified by the IRS of its intent to examine or investigate.

In our earlier blog post “What is the new voluntary disclosure program” we discussed the UVDP and when this option would be best suited to a taxpayer.

The Streamlined Procedures provide an avenue for compliance with the IRS in circumstances where the taxpayer has been non-wilful in failing to file or disclose information with respect to foreign assets, bank accounts and interests. Under the Streamline Procedures, the penalties associated with failing to file can be completely eliminated to substantially reduced.

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Whether a taxpayer falls within the SDOP or the SFOP is dependent on (amongst other things) how much time they have spent in the US over the most recent 3-year period and if they satisfy the non-residency requirement.

If you believe that you or one of your clients have misreported information or income from foreign assets, reach out to the team at Asena Advisors to determine whether you are eligible for the IRS remediation options and determine which option is best for you.

 

For more information, please contact:
Head of US-India Tax Desk