Are you an American living in Canada who has never filed U.S. tax returns? How about F-bars? You may be in trouble as the IRS may take extreme measures to penalize these taxpayers. Luckily, SDG Accountant specializes in assisting Americans living in Canada in compliance with the IRS. We will assist in not only back filing your U.S. tax returns and F-bars, but we also assist in avoiding any negative consequences as a result thereof.
By some estimates, only 30% of American taxpayers living in Canada are in tax compliance with the IRS. Most are unaware of their filing obligations, in that global income must be reported on their tax returns. This is especially true for Americans living in Canada. SDG Accountant has offices on both sides of the border, in Toronto and Chicago.
In response to this non-compliance trend, the IRS launched the Streamlined Compliance Procedure (or “SCP”). The SCP is one of two primary offshore disclosure amnesty programs; the other being the Offshore Voluntary Disclosure Program (or “OVDP”). The purpose of the SCP is to become tax compliant with the IRS while avoiding the hefty penalties that the IRS is notoriously known for. On the other hand, the OVDP is for delinquent taxpayers who wish to be in compliance, but want assurance from the federal government that they will not be criminally prosecuted. OVDP is generally reserved for those who’ve engaged in the questionable offshore financial behaviour. Almost all non-compliant taxpayers choose to take advantage of the SCP. SDG’s Chicago office specializes in representing taxpayers before the IRS in using the SCP.
Canadian individuals who are US citizens or green card holders are required to file annual US tax returns reporting worldwide income even if they do not live in the US or do not owe US taxes. Canadian individuals who spend a significant amount of time in the US in a year may need to file a US tax return which may include disclosure of non-US accounts to the Internal Revenue Service. For both groups of individuals where the aggregate value of their non-US accounts exceeds $10,000 USD any time in the year, they will also have to electronically file a Form 114, Report of Foreign Bank Accounts (FBAR).
The SCP is an intricate procedure which requires the utmost attention to detail. Generally speaking, this entails filing three of the most recent years of tax returns and six of the most recent years of FBARs. The taxpayers must also submit a written certification that their conduct was not willful. Our clients are often worried about whether the IRS will consider their past delinquency to be willful. Indicators of non-willfulness are that the taxpayer was negligent, or simply ignorant of the tax law and wasn’t aware of their filing obligations. Previously, the IRS would send the taxpayer confirmation that their SCP submission was successful, but no longer does. What we do for our clients is monitor their IRS accounts to ensure the filings have been processed.
The voluntary compliance programs provide US individuals with the opportunity to come forward to report previously undisclosed foreign financial assets and pay any taxes plus interest. Individuals who do not become compliant risk substantial penalties and have an increased risk of criminal prosecution. SDG Chicago can walk you through the process and help you determine whether you qualify.
There are several pitfalls to the SCP process. For instance, not marking the top of the returns in red ink as being submitted as part of an SCP package will result in the IRS processing the returns, but not as part of the SCP package (meaning the IRS will likely impose penalties). Our team is made up of CPAs and attorneys who will guide you through the process and make it as painless as possible. We do more than file forms – we represent your financial interests before the federal government’s Internal Revenue Service.
Contact our Chicago office for a consultation to learn more about the procedure and whether the SCP is right for you.
This site provides general information on various tax issues and other matters. The information is not intended to constitute professional advice and may not be appropriate for a specific individual or fact situation. It is written by the author solely in their personal capacity and cannot be attributed to the accounting firm with which they are affiliated. It is not intended to constitute professional advice, and neither the author nor the firm with which the author is associated shall accept any liability in respect of any reliance on the information contained herein. Readers should always consult with their professional advisors in respect of their particular situation.
June 11th, 2018