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IRS Releases OVDP, Streamlined Program Hotline Guide

UNDATED

IRS Releases OVDP, Streamlined Program Hotline Guide

UNDATED
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G-1: Transition Issues

Transition Eligibility

Question: What are the rules for taxpayers that want to transition from OVDP to Streamlined?

Answer: Refer to G-1 a and the Transition FAQs posted to irs.gov

Transition Nonfiler Status

Question: How does the Service determine non-filer status for OVDP participants that want to transition to Streamlined Domestic Offshore Procedures (SDO)?

Answer: SDO does not accept delinquent returns, and this applies to Transition taxpayers. In determining non-filer status for Transition taxpayers, delinquent returns submitted with OVDP submissions before July 1, 2014, are eligible for SDO Transition terms.

G-10: Processing Refunds for OVDP Cases

Question: The taxpayer signed a Form 906 closing agreement and is due an overpayment. But the taxpayer hasn’t received her refund. Is there anything that can be done to facilitate the refund?

Answer: Contact the examiner who handled the certification. If you have already attempted to resolve this with the examiner, let us know your attempts, and we may be able to assist.

Internal guidance: The representative or taxpayer should first try to resolve this with the examiner that handled the certification. If the rep/taxpayer already tried and cannot resolve the matter with the examiner (perhaps the examiner retired or transferred), then notify Christine Stone or Misha Weitzner about the situation. Christine or Misha will contact the examiner who closed the case, or the examiner’s manager if the examiner is no longer with the group, to have the payment refunded. Alternately, Christine or Misha may coordinate with appropriate SB/SE personnel to resolve the case. The field will prepare a Form 3870 to have the freeze code released (usually -B or -D freeze code).

G-11: FBAR

Impact of FBAR Interim Guidance issued on 5/13/2015 on MOP

Question 1: Will the Streamlined SDO miscellaneous offshore penalty (MOP) change in light of the FBAR interim guidance dated May 13, 1015?

Answer 1: No.

Question 2: Will the OVDP MOP change in light of the FBAR interim guidance dated May 13, 1015?

Answer 2: In general no, expect for computations under FAQ 50. See new 2014 OVDP FAQ 50.1.

C-11: FBAR Filing Questions

See 2014 OVDP FAQs 44 through 46 for FBAR guidance and direction on contacting FinCEN.

FAQ 46 states in part: “Do not call the IRS OVDP Hotline with questions about whether you have an FBAR filing requirement. The purpose of the IRS OVDP Hotline is to answer questions about how to make voluntary disclosures and what penalties apply.”

Question 1: A taxpayer maintains a safe deposit box at a foreign bank. The safe deposit box holds physical precious metals. Does the taxpayer have an FBAR filing requirement?

Answer 1: No. The safe deposit box is not considered a financial account for the purposes of FBAR filing requirements.

G-12: OVDP Taxpayers Disclosing Omitted Accounts

Question: I made a voluntary disclosure and realized that I omitted an account/asset from the original disclosure. How may I remedy this?

Answer: You may be able to make a supplemental voluntary disclosure according to the terms of the current OVDP. But we will need additional facts.

1. Hotline will ask the Taxpayer/Representative to identify prior examiner and fax a statement of the facts and circumstances relating to the omission. Taxpayer/Representative must include a copy of the previously executed Form 906, summary of omitted income, and penalty computation for the omitted account(s).

2. Hotline will reach out to OVDP Coordinator (Christine/Misha) who will

a. Contact TP/Rep to gather additional facts if necessary

b. Contact original examiner to verify or gather facts

3. OVDP Coordinator will elevate case to determine If the terms of the current OVDP should be extended to the taxpayer

a. Regardless as to whether the Terms of current OVDP extended/not extended — OVDP Coordinator will provide instruction to exam team.

G-13 Streamlined SDO/SFO Residency Issue

Question: A husband and wife filed a joint OVDP submission. During the early years of the look-back period they filed a joint tax return; in the last years of the look-back period they filed separately. They are eligible for Transition treatment. The husband qualified for SFO, but the wife does not (she would default to SDO). How will the case be handled?

Answer: Both must qualify for SFO in order to receive Transition SFO terms. Hence, they will be subject to Transition SDO. The same analysis applies to new SFO submissions.

G-14 Difference Between SDO and OVDP Penalty Base

Question: What are the differences between the penalty base for OVDP and Streamlined SDO?

Answer: Under the 2014 OVDP, FAQ #35 explains the penalty applies to assets/accounts that are related in any way to tax non-compliance, regardless of the form of the taxpayer’s ownership or the character of the asset; “tax noncompliance includes failure to report gross income from the assets, as well as failure to pay U.S. tax that was due with respect to the funds used to acquire the asset.”

Under Streamlined SDO, “a foreign financial asset is subject to the 5-percent miscellaneous offshore penalty in a given year in the covered FBAR period if the asset should have been, but was not, reported on an FBAR (FinCEN Form 114) for that year. A foreign financial asset is subject to the 5-percent miscellaneous offshore penalty in a given year in the covered tax return period if the asset should have been, but was not, reported on a Form 8938 for that year. A foreign financial asset Is also subject to the 5-percent miscellaneous offshore penalty in a given year In the covered tax return period if the asset was properly reported for that year, but gross income in respect of the asset was not reported in that year.” See also SDO FAQ #6.

G-15 Forms 1040NR in Streamlined

Question: May a taxpayer submit Forms 1040NR for the Streamlined Procedures?

Answer: No. The Streamlined eligibility terms require filing Forms 1040/1041. The Streamlined Procedures clearly state they are available to U.S. individual taxpayers residing either inside or outside the United States.

G-16 Determining OVDP/Streamlined Submission Period

Question 1: How do I determine the tax years to include in my OVDP submission?

Answer 1: 2014 OVDP FAQ 9 addresses the years to include in your submission. The term “voluntary disclosure” as used in FAQ 9 means a submission to Cl pursuant to 2014 OVDP FAQ 24.

Question 2: How do I determine the tax years to include in my Streamlined submission?

Answer 2: From SDO website — “For each of the most recent 3 years for which the U.S, tax return due date (or properly applied for extended due date) has passed, submit a complete and accurate amended tax return using Form 1040X, Amended U.S. Individual Income Tax Return, . . .”.

Streamlined Examples

A) Today is May 10, 2016 — you already filed your 2015 return. Submit amended tax returns for 2013, 2014, 2015.

B) Today is May 10, 2016 — you did not file your 2015 return but you filed for an extension of time to file. Submit amended tax returns for 2012, 2013, 2014.

C) Today is July 1, 2016 — you filed for an extension for 2015 and later filed your 2015 return on June 1, 2016. Because you filed the 2015 return, the due date has effectively passed and 2015 is no longer on extension. Submit amended tax returns for 2013, 2014, 2015.

G-17 Taxpayer Selected for Exam after Pre-Clearance

Question: A taxpayer was pre-cleared by Cl to come into OVDP. After pre-clearance but before acceptance by Cl Into OVDP, the taxpayer received a notice of examination. Is the taxpayer eligible for OVDP?

Answer: Yes. Exam activity after pre-clearance does not disqualify a taxpayer from participating In OVDP.

G-18 Signatures

Deceased OVDP Taxpayer Where Estate Has No Representative

Question: Taxpayer enters OVDP and then dies. No probate or court administration is opened, So no executor or administrator is ever appointed. How will examiners handle an OVDP case with no fiduciary appointed for a decedent?

Answer: In general, a representative fiduciary will need to sign the OVDP closing agreement on behalf of a decedent. In certain jurisdictions, a fiduciary relationship may arise under local law. Please provide all facts and documents to the examiner handling the OVDP certification for analysis and possible elevation.

Who May Sign a Streamlined Certification?

Question 1: May a representative appointed by means of a Form 2848 (POA) sign a Streamlined certification on behalf of a taxpayer?

Answer 1: The standards for accepting returns and certifications for the Streamlined Filing Compliance Procedures are consistent with normal tax return filing procedures. In general, a representative cannot sign tax returns. Therefore, a representative cannot sign a Streamlined certification.

Question 2: Husband and wife filed MFJ and want to make an SDO submission, The husband is present in the United States but the wife is currently in a remote area of a foreign country doing research. Can the husband sign the SDO Certification and the Forms 1040X for her?

Answer 2: In general, the husband cannot simply sign the certification and amended returns for his absent wife. The wife may appoint her husband to sign returns for her by means of a Form 2848. But if the wife cannot sign the returns, it’s not likely she can sign the Form 28487Vvs an acceptable alternative, husband can use the procedures in SDO FAQ 14 or SFO FAQ 7 to make a submission without his wife. He should explain the circumstances in the narrative statement of facts.

G-19 Amended Streamlined Certifications

Question: By what process may a taxpayer who made a Streamlined Procedures submission correct an error relating to a tax return and/or certification (Form 14653 or Form 14654)?

Answer: A taxpayer that made an error in a Streamlined Procedures submission may correct the error by providing corrected amended returns and/or an amended certification (Form 14653 or Form 14654). On the top of the certification form, write “amended” in red ink. Explain all facts and circumstances concerning the “error“ in the original Streamlined Submission and the facts and circumstances related to original tax and FBAR noncompliance. See SDO FAQ 13 and SFO FAQ 6 for relevant information to provide. The disclosure period related to the “amended” Streamlined submission should mirror the disclosure period of the original Streamlined submission. The amended income tax returns may need to include amended international information returns including but not limited to Forms 8938, 3520, and 5471.

Mail the amended submission to:

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

Additionally, if the taxpayer made errors in filing FBARs, the taxpayer must efile with FinCEN amended FBARs.

If an amendment is necessary for non-offshore reasons, the taxpayer should follow normal processing instructions for submitting Forms 1040X. For example, dependency exemption issues, child tax credit issues, and similar issues do not relate to the Streamlined Procedures and do not impact Streamlined certifications on Forms 14653 and 14654. Hence, non-Streamlined corrections should not be submitted again through the Streamlined Procedures.

Example: A taxpayer who made an SDO submission on February 1, 2016 realized she failed to include a foreign financial asset on Form 14654 and include that asset in the penalty base. Additionally, she failed to include income from that omitted foreign financial asset on her Forms 1040 for the tax periods in her Streamlined Submission, tax years 2012, 2013, and 2014. She should provide amended income tax returns for tax years 2012, 2013, and 2014, an amended Streamlined certification on Form 14654, and payment for the increase in tax and the SDO MOP.

Talking Points for Revenue Agents & Hotline After June 30, 2014
Final 7/1/14

If I’ve already made an OVDP submission, how does this announcement affect me?

It depends on the status of your case.

Q. Did you mail your voluntary disclosure letter and attachment before July 1?

No — Then you must choose between OVDP and the Streamlined Procedures.

Yes — Go to next question.

Q. Have both you and the IRS signed a closing agreement?

Yes — Then the agreement is final and cannot be changed.

No — Go to next question.

Q. Have you been removed from OVDP?

Yes — Then the removal is final and you will be examined. It is too late to get the streamlined treatment.

No — go to the next question.

Q. Have you opted out?

Yes —

Q. Have you received a letter initiating an examination?

Yes — You are under examination and it is too late for streamlined treatment.

No — you may request the new penalty structure within OVDP. Refer TP/rep to the Announcement (Coordination with Treatment under OVDP) and Transition FAQs for further details, terms, eligibility and how to request the new penalty structure.

No — you may request the new penalty structure within OVDP. Refer TP/rep to the Announcement (Coordination with Treatment under OVDP) and Transition FAQs for further details, terms, eligibility and how to request the new penalty structure.

I mailed in my disclosure letter and attachment before July 1, 2014, but have not yet received my preliminary acceptance letter from Cl. How am I affected?

If you are subsequently accepted as timely by Cl, you may request streamlined foreign or streamlined domestic transition terms. Refer to the Announcement (Coordination with Treatment under OVDP) and Transition FAQs for further details, terms, eligibility and how to request the new penalty structure.

I requested preclearance (or received preclearance from Cl) before July 1 but have not mailed In my disclosure letter yet. Am I covered by the transition rules?

No. You are not eligible for the streamlined transition terms. You must choose between submitting a voluntary disclosure under the new program terms or submitting amended returns, delinquent FBARs/other international information returns and non-willful certification in accordance with the new streamlined foreign or streamlined domestic procedures. Under the streamlined procedures you will not receive a Form 906 Closing Agreement.

Why does IRS have to agree to allow the streamlined penalty terms if I am in OVDP and certify that I was not willful under the transition rules, but the penalty terms are automatic in the new streamlined domestic cases?

Under the transition rules you’re receiving the benefit of a closing agreement (Form 906) which closes the matter with finality, so IRS has to agree to the application of the streamlined penalty treatment. If the IRS does not agree, any taxpayer believing his noncompliance was not willful has the right to opt out of OVDP and be examined. Taxpayers certifying their non-willfulness under the new streamlined procedures, by contrast, will get the lower penalties when they file, but do not get a closing agreement and run the normal risk of being examined.

How will the IRS decide whether to allow the streamlined penalty treatment under the transition rules?

This decision will be based on the facts and circumstances of each case. If there is doubt about the taxpayer's certification, the IRS will not agree to the lower penalty within OVDP and the taxpayer will have to opt out to argue for lower or no penalties

What If I don’t agree with the IRS’s decision not to include the streamlined penalty terms In my closing agreement?

All determinations within OVPD are final and there are no appeal rights. If you disagree, you have the right to opt out of the program.

My Form 906 has been executed. Why am I not allowed reconsideration under these new terms?

An executed closing agreement is binding on all parties. The OVDP terms offered in the various initiatives were final and conclusive once the agreement was signed by both parties. Prior to signing the closing agreement, taxpayers had the opportunity to opt out of the civil settlement arrangement If they believed they were non-willful or had reasonable cause. It was well-publicized in the announcements of the previous programs that terms could change at any time and there was no guarantee that any changes would be retroactively applied to closed cases.

But IRS allowed reconsiderations in the past, why not now?

The Streamlined Filing Compliance Procedures provide a filing procedure for taxpayers with offshore noncompliance Issues resulting from non-willful conduct. OVDP Is designed for willful evaders. The Streamlined Filing Compliance Procedures are not part of the OVDP. In 2011, after careful consideration and deliberation, we decided to reconsider a limited number of closed cases because new 5% and 12.5% reduced penalty terms were incorporated into OVDP. Moreover, taxpayers have always had the ability to opt out of the civil settlement structure of OVDP to present their reasonable cause and non-willful arguments.

Why did you (the revenue agent) proceed with business as usual on these cases when you knew changes were coming?

The terms were released to the field when they were released to the public. Taxpayers have always had the option to opt out.

HOTLINE QUESTION: Is the program going to change again?

As with previous program terms and changes, the terms of this program could change at any time going forward. Taxpayers and their representatives are advised to evaluate the facts of their case In light of these current guidelines to determine the best approach to move their case forward to resolution.

G-2: Determining OVDP Programs (2012 v. 2014)

Question: How do we determine the cutoff between the 2012 OVDP and the 2014 OVDP?

Answer: Refer to G-1a and the Transition FAQs

Internally: We will consider FAQ 24 submissions with a received date stamp of 7-15-14 or prior as timely for the 2012 OVDP.

G-20 Streamlined Submissions without SSNs

Question: 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?

Answer: See SFO FAQ 10 and SDO FAQ 17

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. 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.

G-21 Potentially Barred Refunds

Question: Within OVDP, if a taxpayer’s amended return shows a refund or overpayment but the tax year has a closed refund statute of limitation, how should any overpayments or potential refunds be handled?

Answer: In each case, the refund statute of limitation must be fully analyzed by the revenue agent handling the certification. If the revenue agent determines that the refund statute of limitation is closed for a specific tax year, any refund/overpayment for that year would be unavailable to satisfy liabilities for other tax years in the OVDP disclosure period.

G-22 Claims for Refund Resulting from Rejected Allocation

Hypothetical: Taxpayers with joint ownership of a foreign financial asset (FFA) select different offshore compliance options. Taxpayer A and Taxpayer B assert they jointly own an FFA with a fair market value of $100. Taxpayer A received clearance to participate in OVDP and makes an OVDP submission, and Taxpayer B makes a submission using Streamlined SDO. Taxpayer A claims 30% ownership in the FFA, and Taxpayer B claims 70% ownership in the FFA. For purposes of this hypothetical, Taxpayers A and B have no other FFAs. Taxpayer A reports on amended income tax returns 30% of the income generated from FFA, and Taxpayer B reports on amended income tax returns 70% of the income generated from FFA. Taxpayer A pays the OVDP MOP at 27.5% on FFA value of $30 (MOP amount $8.25), and Taxpayer B pays the Streamlined SDO MOP at 5% on FFA value of $70 (MOP amount $3.5).

During the certification of Taxpayer A, the Service does not accept Taxpayer A’s allocation because the evidence of joint ownership is unclear or not convincing. The Service requires Taxpayer A to report all income from FFA and to pay the OVDP MOP on the full value of FFA; otherwise Taxpayer A will be removed from OVDP. Taxpayer A pays the OVDP MOP on the full value of FFA (MOP amount $27.5).

Question 1

May Taxpayer B seek a refund of the Streamlined SDO MOP in the amount of $3.5 relating to FFA because the full value of FFA was included in Taxpayer A’s OVDP MOP penalty base?

Answer 1

Assuming a claim for refund would be timely under the refund statute of limitation (I.R.C. § 6511), Taxpayer B still may not seek a refund of the Streamlined SDO MOP. The Streamlined SDO certification Form 14654 specifically states: “I waive the right to seek a refund or abatement of the miscellaneous offshore penalty.” Taxpayers bear the risk of the Service not accepting allocations relating to joint ownership when they use different offshore compliance options. Allocation of assets is only permitted when all parties use OVDP under 2014 OVDP FAQs 39 and 40.

Question 2

May Taxpayer B seek a refund of taxes paid relating to the 70% of income from FFA because Taxpayer A paid income taxes on all income from FFA within OVDP?

Answer 2

Assuming a claim for refund would be timely under the refund statute of limitation (I.R.C. § 6511), Taxpayer B may seek a refund of the taxes paid relating to the income from FFA. Taxpayer B must adhere to the following procedure to make a claim for refund under this circumstance:

1. Prepare amended income tax returns on Forms 1040X and write “Streamlined Amended” in red ink on the top of each.

a. Provide thorough explanations with facts for the refund claims.

b. Staple a copy of the signed closing agreement for Taxpayer A to each Form 1040X. The claims for refund will be rejected as not processable if they do not include the signed closing agreement for Taxpayer A.

2. Mail the amended income tax returns to:

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

G-23 Facilitators listed in FAQ 7.2 and Nov. 15 deadline

Question: How does the recent addition of 40 facilitators to the list of Foreign Financial Institutions found in FAQ 7.2 impact taxpayers making voluntary disclosures?

Answer: The IRS recently updated the list of Foreign Financial Institutions or Facilitators embedded within FAQ 7.2. Previously, this list has focused on foreign financial institutions. The addition of facilitators is not a change in policy and has been contemplated by the 2014 OVDP FAQs since publishing the FAQs in June 2014. Because the addition of a large number of facilitators at one time may be perceived as a change by practitioners, the IRS will not apply the 50% MOP rate to clients of the “newly” listed facilitators who submit their preclearance requests on or before November 15, 2016.

G-24 Virtual currency reporting issues

Question 1: What guidance has the IRS published on virtual currency?

Answer 1: The IRS published Notice 2014-21. This notice describes how existing general tax principles apply to transactions using virtual currency.

Question 2: Do I have a requirement to report virtual currency held on a foreign virtual currency exchange on Form 8938?

Answer 2: The IRS is unable to provide a general answer on this issue because the workings of foreign virtual currency exchanges are not transparent. If the foreign virtual currency exchange meets the definition of a foreign financial institution pursuant to the regulations promulgated under I.R.C. §§ 1471 through 1474, then a taxpayer may have a reporting obligation. We recommend that practitioners and taxpayers carefully analyze their facts and circumstances in light of the regulations promulgated under I.R.C. §§ 6038Dand 1471 through 1474.

Additionally, the IRS has previously requested public comments on the treatment of virtual currencies in the context of § 6038D reporting. To date, the IRS has received no public comments. We encourage taxpayers and tax practitioners to provide their input on the subject to the IRS at the following address:

Joseph S. Henderson
Office of Chief Counsel
1111 Constitution Ave NW
Rm. 4554 (CC:INTL)
Washington, DC 20224

Question 3: Do I have a requirement to report virtual currency held on a foreign virtual currency exchange on FBAR reports?

Answer 3: Reporting regulations and procedures relating to the FBAR report are promulgated by FinCEN. Please contact FinCEN at 1-866-270-0733 (toll free within the United States) or 1-313-234-6146 (not a toll-free number) from 8 a.m. to 4:30 p.m. Eastern time, except for weekends and federal holidays.

G-3: 2012 Streamlined Eligibility

Question: What taxpayers are eligible for the 2012 Streamlined Procedures?

Answer: A taxpayer who was accepted into the 2011 OVDI (before 9/1/12) and who did not opt out and enter Streamlined prior to July 1, 2014, may no longer do so. Since July 1, 2014, a taxpayer eligible for treatment under the Streamlined Procedures who has submitted, a voluntary disclosure letter under the OVDP (or any predecessor offshore voluntary disclosure program) prior to July 1, 2014, but who does not yet have a fully executed OVDP closing agreement, may request transition treatment within the OVDP.

G-4: Alternative MTM PFIC

Question: Is the alternative PFIC MTM method provided for in OVDI/OVDP available to taxpayers using the 2012 Streamlined Procedures or using the 2014 Streamlined Procedures?

Answer: No. Only taxpayers in OVDI/OVDP may use the alternative MTM PFIC computation.

G-5: Joint Filing Issues OVDP/Streamlined

Question 1: May a spouse that files joint returns enter OVDP without the other spouse?

Answer 1: Yes.

Question 2: When spouses file joint returns, may one spouse enter OVDP and the other spouse make a Streamlined submission?

Answer 2: No. Spouses who filed joint returns must jointly make Streamlined submissions except for the limited circumstances provided for in SDO FAQ #14 and SFO FAQ #7.

Question 3: Assume the date is 11/1/2014. Taxpayers filed joint returns for tax years 2011, 2012, and 2013. They divorced on 10/1/2014. Taxpayer-husband wants to make a submission to SDO but his ex-wife will not participate in filing joint amended income tax returns for tax years 2011, 2012, and 2013. May taxpayer-husband make a submission to SDO?

Answer 3: Yes. He may make a submission using the procedures outlined in SDO FAQ #14 and SFO FAQ #7.

G-6: Expatriating Issues

Question: I’m a U.S. citizen living in a foreign country. I don’t want to file tax returns any more. Can I simply expatriate to avoid my tax responsibilities?

Answer: Expatriating is a serious matter with tax ramifications. We recommend researching the issue on IRS.gov. Please read Notice 2005-36 and this website — https://www.irs.qov/lndividuals/lnternational-Taxpayers/Expatriation-Tax
The IRS also recommends reading information on the Department of State’s website such as https://travel.state.qov/content/travel/en/leqal-considerations/us-citizenship-laws-policies/citizenship-and-dual-nationality.html

Question: May expatriating taxpayers submit more than three years of tax returns under the Streamlined Procedures?

Answer: Expatriating taxpayers may submit five years of tax returns under the Streamlined Procedures. Each of the five years must include the appropriate “Streamlined” submission annotation in red ink on the certification form and on the top of the first page of all Forms 1040.

G-7: Determining OVDP 50% MOP

Question: How does a taxpayer determine whether a foreign financial account is subject to the 50% MOP?

Answer: See FAQ 7.2, If a specified “public disclosure” has been made concerning a foreign financial institution or facilitator at the time the taxpayer submits a preclearance letter to Criminal Investigation, then all of the taxpayer’s noncompliant accounts at foreign financial institutions will be subject to the 50% penalty. The initial effective date is 8/4/2014. The link in FAQ 7.2 to the “listed banks” includes an effective date of the public disclosure for all banks added to the list after 8/4/2014.

Timing Examples:

Taxpayer makes a FAQ 23 preclearance request 7/10/14. A public disclosure relating to Bank was made prior to 7/1/2014, and the Bank is listed in FAQ 7.2 when the 2014 OVDP FAQs were released. OVDP FAQ 24 submission is made 9/1/14. Taxpayer is in 2014 OVDP but subject to 27.5% penalty because she made her preclearance before 8/4/2014.

Taxpayer makes a preclearance request per FAQ 23 on 1/26/15. A public disclosure relating to Bank is made on 2/14/15. Taxpayer makes a submission to OVDP per FAQ 24 on 3/1/15. Taxpayer is in 2014 OVDP subject to the 27.5% penalty because she requested preclearance before the public disclosure about the bank was made.

Taxpayer makes a preclearance request per FAQ 23 on 3/1/15 and FAQ 24 submission on 3/15/15. Bank is publically announced on 2/1/15. Taxpayer is in 2014 OVDP subject to the 50% penalty because the preclearance was made after a public disclosure concerning the bank was made.

Other Examples:

Question 1: If a taxpayer held an account at a bank subject to “public disclosure” (a.k.a. “listed bank”) but closed the account in 2010, is that account subject to the 50% penalty?

Answer 1: Assuming the preclearance request is made after the public disclosure, any foreign financial account held at a listed bank during the OVDP disclosure period subjects all accounts to the 50% penalty.

Question 2: According to a caller, a Chicago newspaper indicated that another foreign financial institution is under investigation by the DOJ. If the taxpayer has an account at this bank, does the newspaper article constitute public disclosure for purposed of FAQ 7.2?

Answer 2: The newspaper article itself is not a public disclosure by IRS or DOJ, but newspaper articles may report on public disclosures. A public disclosure of an investigation by the IRS or DOJ, cooperation in an investigation by the IRS or DOJ, or the filing of a John Doe Summons relating to the bank triggers the 50% MOP. Note the examples of public disclosures in FAQ 7.2. The 50% MOP is triggered the day of the public disclosure, not by updating of the list of banks embedded in FAQ 7.2. Generally, the list in FAQ 7.2 includes the effective date; that effective date corresponds to the date of the public disclosure, not the date of posting on IRS.gov.

G-8: Foreign Pensions Issues

See 2014 OVDP FAQ 55

Question: How do I report my pension under the terms of a tax treaty?

Answer: Treaty issues are very technical and you may want to consult a professional advisor. If you decide to make an OVDP submission and take a treaty-based position, please consult IRS.gov including https://www.irs.gov/lndividuals/lnternational-Taxpayers/Tax-Treaties. Then, in making your OVDP submission, explain fully any treaty-based positions underlying your delinquent/amended returns.

Question: I have a retirement or pension plan in a foreign country (other than a Canadian RRSP, RRIF, or other similar Canadian retirement plan) that I do not believe should be included in the OVDP offshore penalty base. What should I do?

Answer: Please provide the OVDP Hotline specific information including (i) the country where the plan is maintained, (ii) whether the plan is employer-sponsored, and (iii) whether any income tax treaty provisions may apply. Provide any documents you have to support your inquiry and position.

Hotline Personnel: Provide information to OVDP Coordinator for consideration and elevation.

Canadian (RRSP/RRIF) and Rev. Proc. 2014-55

2014 OVDP FAQs 54.2 through 54.4

SDO FAQs 8 through 12

SFO FAQs 2 through 5

Question 1: (OVDP and Streamlined): Are taxpayers with RRSP/RRIF accounts required to file Form 8891 for OVDP or Streamlined submissions?

Answer 1: If taxpayers are “eligible taxpayers” under Rev. Proc. 2014-55, they do not need to submit Forms 8891. Taxpayers that are “eligible taxpayers” should note their eligibility in their submission.

Question 2: (OVDP and Streamlined): Are RRSP/RRIF accounts subject to the MOP?

Answer 2: if taxpayers are “eligible taxpayers” under Rev. Proc. 2014-55, RRSP/RRIF accounts are not subject to the MOP in either OVDP or Streamlined.

Question 3: (OVDP only): If an OVDP participant taxpayer has an RRSP/RRIF account and is not an “eligible taxpayer” under Rev. Proc. 2014-55 because she was a non-filer, how should the taxpayer proceed?

Answer 3: The taxpayer should explain her facts in the OVDP submission, and the closing agreement will afford relief consistent with Rev. Proc. 2014-55.

Question 4: Is an RRSP/RRIF or similar Canadian retirement account includable in the SDO MOP?

Answer 4: In general, RRSP/RRIF or similar Canadian retirement accounts are not included In the SDO MOP. See SDO FAQs #8 and #10.
Although the asset is not included in the SDO MOP penalty base, it may need to be reported on FBARs or Forms 8938

Australian Superannuation Accounts (ASA)

Question: What reporting requirements are necessary for SuperAnnuation Accounts (ASA), and are there any special provisions for ASAs In OVDP?

Answer: ASAs, unlike Canadian RRSP/RRIFs, are not covered by treaty provisions and vary greatly. OVDP has no special provisions for ASAs, and each case must be analyzed individually. ASAs that are tax noncompliant are subject to the MOP. ASAs may be subject to a variety of international information return requirements including but not limited to Forms 3520 and 3520-A relating to foreign trusts.

G-9: Foreign Estates/Trusts/Gifts in OVDP

Question: What information return and tax returns may foreign estates and trusts be required to file?

Answer: The answer will depend on the specific facts and circumstances including potentially the analysis of foreign law. The possibilities for information returns and tax returns include but are not limited to:

Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts

Form 3520-A, Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner

U.S. Estate Tax Return — There may be a U.S. Estate Tax due depending on the value of the decedent’s worldwide assets. If the OVDP involves foreign assets inherited from a non-resident alien, those assets must be included in the estate tax analysis. In addition, if the decedent was a covered ex-pat then the U.S. person receiving a gift or bequest from the foreign estate of the ex-pat may owe a transfer tax under IRC § 2801.

Refer callers to the Instructions for those forms and IRS.gov including http://www.irs.gov/Businesses/Gifts-from-Foreign-Person

http://www.irs.qov/lndividuals/lnternational-Taxpayers/Some-Nonresidents-with-U.S.-Assets-Must-File-Estate-Tax-Returns

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