The IRS recognized that the Offshore Voluntary Disclosure Initiative was a one-size-fits-all program that was in many cases unfair and too harsh on taxpayers who did not willfully fail to file their required Foreign Bank Account Reports and other foreign information returns. In many instances for example, taxpayers who didn’t know their parents established a foreign account on their behalf or inherited funds from their parents were required to pay the same offshore penalty rate (27.5%) as a taxpayer who deliberately set up a foreign account to divert their unreported income.
Beginning July 1, 2014 the IRS initiated a new program called the Streamlined Offshore Procedures. The original Offshore Voluntary Disclosure program is still in existence however the new Streamlined program applies to taxpayers who certify under penalty of perjury that their failure to file FBARS and other foreign information returns was non-willful.
The Streamlined procedures consists of two programs; one for taxpayers who reside in the U.S. and the other for non-resident U.S. persons living abroad. There are different procedures and IRS forms required for domestic and foreign streamlined applications. However both programs significantly reduce the cost and burdens associated with the OVDI.
