new SFCP 6/18/2014.... now SDOP and SFOP‏

The benefit of this new program should not be for tax lawyers. It should be an easy and inexpensive way for Americans abroad who want to come into compliance to do so. I think the IRS realizes how much time and money they wasted on minnow cases so far.
While it is good to be cautious, don’t forget that stressing the complexities of these programs by tax professionals creates fear and brings clients to them and remember, everything the IRS does is designed by lawyers for lawyers and by its nature assures that the advantage goes to the designer.
There are two types of Streamline filings:  Non-resident and Resident.  The Nonresident program -- referred to as Streamlined Foreign Offshore Procedures -- is described on a web page titled: U.S. Taxpayers Residing Outside the United States, here. The Resident program -- referred to as Streamlined Domestic Offshore Procedures -- is described on a web page titled U.S. Taxpayers Residing in the United States, here.
A taxpayer eligible for treatment under the streamlined procedures who submits, or 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 treatment under the applicable penalty terms available under the streamlined procedures.


(1) meet the applicable non-residency requirement
(2) have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and such failures resulted from non-willful conduct.
Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law. A taxpayer who is eligible to use these Streamlined Foreign Offshore Procedures and who complies with all of the instructions outlined below will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties. Even if returns properly filed under these procedures are subsequently selected for audit under existing audit selection processes, the taxpayer will not be subject to failure-to-file and failure-to-pay penalties or accuracy-related penalties with respect to amounts reported on those returns, or to information return penalties or FBAR penalties, unless the examination results in a determination that the original tax noncompliance was fraudulent and/or that the FBAR violation was willful. For returns filed under these procedures, retroactive relief will be provided for failure to timely elect income deferral on certain retirement and savings plans where deferral is permitted by the applicable treaty.  If you enter the SFOP/SDOP the returns are processed like any other returns. No news is good news. If the IRS wants more money or wants to audit, they will contact you. Otherwise the submissions will not be acknowledged. That could mean a lot of sleepless nights for people who are worried about the strength of their willfulness arguments. 



Streamlined Program – Opening the program up
1. Participants are not restricted to those who less than $1500 in tax;
2. There is no longer the “detailed questionnaire” to determine “low compliance risk”;
3. Taxpayers living outside the United States (AKA “Americans abroad) can come into compliance WITHOUT PENALTIES by certifying that the lack of compliance was “non-willful”.
4. Taxpayers resident in the United States (Green Card Holders ) can come into compliance by paying a 5% penalty on the “offshore account” which was the reason for the non-compliance.
5. The new streamlined program can also be used for “amended returns”.  It allows people to correct the inevitable mistakes  associated with U.S. citizenship abroad. This does include those who have made “quiet disclosures”. Previous penalties assessed will NOT be abated.
If the taxpayer has not sent in the OVDL intake letter (the step after receipt of the preclearance), he does not do anything else in OVDP and goes straight to streamlined. If you are not going to complete the OVDP process, you should write a formal letter  (before 7/1/2014) withdrawing from the process otherwise you will be processed under the transition rules which are not quite as favorable . The same applies to OVDL intake letter and final package submission - if you withdraw it does not make a difference in which particular stage of the process you were. There is no hold procedure on that and there is no preclearance under streamlined. If you look at the streamline transition FAQ 2, it indicates that for the transition rule to apply the person must have "remained in OVDI/P but not yet completed the OVDI/P certification process where a Form 906 Closing Agreement has been fully executed by the IRS." The transitioned penalty base will be the same as the streamlined - financial assets only.
Keep in mind, though, that the certification of non-willfulness applies to all income and tax underreported. Remember that the offshore penalty (the 27 1/2% penalty) is not an FBAR penalty. It is a miscellaneous IRS penalty which in some ways may be viewed as a proxy for the FBAR penalty (if the FBAR penalty were the only other penalty that could have applied). The 50% penalty kicks in only in OVDP. It does not apply in the streamlined program. Again - the OVDP is designed for willful actors who don't opt out. By definition, the streamlined program is not available to willful actors -- the certification process weeds out the willful actors (except those willfully filing a false certification).
Until you sign Form 906 (Closing Agreements recently signed by tax payers but not yet signed by IRS were put on hold), you are still in OVDI/P and should be able to qualify for the new transition rules (i.e., 5% for the offshore penalties). The question, of course, is whether you qualify.
If you are still in OVDI/P on July 1 or afterwards, then you proceed under OVDI/P and get a potential offshore penalty mitigation to the streamlined 0% or 5%, but the 8 years of amended returns with tax, 20% accuracy related penalty on the income tax and interest are required and will not be refunded. (Despite the ABA webinar comments, it is unclear whether the IRS will allow people to leave the OVDI/P and that there is nothing in writing permitting that. Apparently the issue is being considered by the Commissioner's Office). Even when staying in OVDI/P keep in mind if the taxpayer was not willful on the opt out they may get as good a result as the streamlined program offers. That is heavily fact dependent, of course, but one of the reasons for the new streamlined programs was to achieve a rough and ready result of roughly what they might achieve on opt out, so that the class of taxpayers would not have to join OVDP in the first place (which unnecessarily chews up a lot of IRS resources).
In addition, it could be than, on opt out, for a quick resolution, the IRS might just mimic the streamlined program result. We'll have to see how this plays out. Hopefully, of course, the best result is for the IRS to honor Ms. Best's indication.
The straight streamlined result is better because only 3 years of income tax returns are required and there is no 20% accuracy income tax penalty. So the question is whether a taxpayer can withdraw from OVDI/P by 7/1/14, which is the key date for the transition rule to kick in per transition FAQ 2. It seems to say that, if the taxpayer is not in OVDI/P as of 7/1/14, the transition rule does not apply. That would, logically, seem to permit the taxpayer to withdraw and proceed only under streamlined. Write a letter prior to 7/1/14 notifying the IRS of the withdrawal and not to expect the complete package.
If the foregoing works so that you are not in OVDI/P and can proceed under streamlined, logically you could get a refund for years prior to the earliest streamlined covered year but watch out for the refund statute of limitations. However, I suppose the IRS could argue that it has no authority to make a refund payment if you are not entitled to one, but in order for the IRS to make that argument it would have to find an open statute of limitations, such as fraud or a 6 year that has been preserved by the consents to extend required by OVDI/P). But if you are in OVDI/P as of 7/1/14 you are to (i) accept the 27 1/2%, (ii) get the reduction to 5% or 0%  if the IRS accepts the certification, or (iii) opt out of OVDI/P and hope for the best. Of course, if the IRS does not accept certification, this is probably a signal that opting out does not make much sense. Can the criteria for establishing non-willfulness change with the program or with the penalty applied ? If you want to pay only 5% (SDOP) you need to work harder to prove non-willfulness than when you pay max. $10K per year when you opt out ? I think this is the way it looks currently - the program is so new that maybe those who consider transitioning should wait for a while until the new rules had a chance to be applied to real life cases.
With regards to the 50% penalty, if an individual has already been pre-cleared but has not sent in his intake letter will he be subject to the higher penalty if his bank is already on the list or an event that constitutes a public disclosure ?
Does the language allow the IRS to claim retroactively that the bank was already under investigation when pre-clearance was submitted  ? A clear NO -  Simply because a bank is known or rumored to be under investigation is not enough, there has to be an indictment, John Doe Summons, etc. to be a problem.



http://apps.americanbar.org/cle/programs/nosearch/materials/2014/t14gtecm1.pdf
https://drive.google.com/file/...

The possibility that the IRS takes issue with a "non-willful" representation in a Streamlined disclosure : a diversion of taxable income to an undisclosed account... But what about, e.g., an account where the US owner withdrew funds? Assume further that this is the sole "bad fact", and there were no other indicia of willfulness. We know that there is case law that holds that use of the accounts (withdrawals) coupled with failure to "check the box" on Schedule B of Form 1040, constitutes willfulness. So, in the absence of any other "bad facts", is a taxpayer who withdrew 2,000 Euro while in Europe not eligible for the Streamlined program? Or, asked another way, if the IRS will see withdrawals on the bank statements, what is the possibility of the IRS now rejecting the non-willful submission? Further, what would happen next, an automatic 50% penalty for willfulness, or a full examination and application of all available penalties?
The willfulness standard is the same in a criminal and civil context except as to proof of willfulnees. In a criminal case, the proof must be beyond a reasonable doubt. In a civil case, the proof must be by a preponderance of the evidence  or clear and convincing evidence.


 http://www.irs.gov/pub/irs-utl/CertUSResidents.pdf
 http://www.irs.gov/pub/irs-utl/CertNonResidents.pdf