The IRS is seeking comments and input from the general public on the main programs taxpayers can use to obtain penalty relief for late reporting of foreign financial assets and foreign income.

Background

Generally, when individuals or businesses fail to report foreign financial assets and/or foreign income on time, they can take advantage of several different types of IRS Amnesty Programs to assist with the remediation of that reporting, at reduced penalty rates. This is known as Offshore Voluntary Disclosure, and it stems from a long-standing IRS procedure known as Voluntary Disclosure Practice.

Currently, Voluntary Disclosure Practice is used by taxpayers who have indicia of willfulness that may involve criminal liability. 

“A voluntary disclosure will not automatically guarantee immunity from prosecution; however, a voluntary disclosure may result in prosecution not being recommended. Form 14457 is used for all voluntary disclosures.”1

For taxpayers who are considered “non-willful” (which generally includes no indicia of criminal liability), the IRS offers the Streamlined Filing Compliance Procedures (SFCP). SFCP then has two different versions—one for domestic filers, and one for foreign filers. The domestic version is known as the Streamlined Domestic Offshore Procedures (SDOP) and uses IRS Form 14654 for all disclosures. The foreign version is known as the Streamlined Foreign Offshore Procedures (SFOP) and uses IRS Form 14653 for all disclosures.

What input is the IRS seeking via its request for comments?

In the Federal Register for Monday October 21, 2024, with regard to the burden of data collection for SFCP and SDOP, the IRS (“agency”) requested comments and input from the general public on the following topics:

  • Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility?
  • The accuracy of the agency’s estimate of the burden of the collection of information.
  • Ways to enhance the quality, utility, and clarity of the information to be collected.
  • Ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
  • Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

The IRS has asked that all comments be provided on or before December 20, 2024, to:

Andres Garcia
Internal Revenue Service, Room 6526,
1111 Constitution Avenue NW,
Washington, DC 20224

OR

By email to pra.comments@irs.gov

Include OMB control number 1545–2241 or Voluntary Disclosure Practice and the Streamlined Filing Compliance Procedures, in the subject line.

What does The Wolf Group recommend?

Comments, observations, and suggestions from taxpayers and/or tax practitioners that have either used these forms and/or amnesty programs are very helpful for future updates by the IRS. The IRS cannot make these forms clearer, easier to complete, or institute other potential upgrades without constructive feedback. The Wolf Group will be submitting its comments and suggestions, and we urge our clients, fellow tax practitioners, and interested individuals in the general public to do so, as well.

The Wolf Group is a Certified Public Accounting firm in Fairfax, Virginia, with over 40 years of experience with international informational return disclosure, including Offshore Voluntary Disclosure, Streamlined Filing Compliance Procedures submissions, and other related paths to disclosure.