Under the streamlined foreign offshore procedure, taxpayers must certify that their conduct relating to the failure to file FBARs (FinCen Form 114) and disclosing foreign accounts was not willful on Form 14653 – Certification by U.S. Person Residing Outside of the United
States for Streamlined Foreign Offshore Procedures.
Form 14653 – Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures
On the Form 14653, you must provide specific reasons for your failure to report all income, pay all tax, and submit all required information returns, including FBARs.
You must include the whole story including favorable and unfavorable facts. Specific reasons, whether favorable or unfavorable to you, should include your personal background, financial background, and anything else you believe is relevant to your failure to report all income, pay all tax, and submit all required information returns, including FBARs.
Additionally, explain the source of funds in all of your foreign financial accounts/assets. For example, explain whether you inherited the account/asset, whether you opened it while residing in a foreign country, or whether you had a business reason to open or use it. And explain your contacts with the account/asset including withdrawals, deposits, and investment/management decisions. Provide a complete story about your foreign financial account/asset.
The above points address common requirements that must be included in the Form 14653 and the challenge that many taxpayers face in providing adequate explanations and commentary on their factual “story”.
Common Explanations Required For The Form 14653
Below are common situations that may apply to you:
- Many taxpayers fail to acknowledge their financial interest in or signature authority over foreign financial accounts on Form 1040, Schedule B. If you (or your return preparer) inadvertently checked “no” on Schedule B, line 7a, an explanation must be provided.
- Taxpayers that own or control a foreign entity (e.g., corporation, trust, partnership, IBC, etc.) and failed to properly report ownership of the entity or transactions with the foreign entity (such as on the Form 5471 ). If you (or your return preparer) inadvertently failed to report ownership or control of the foreign entity or transactions with the foreign entity, an explanation of why and inclusion of your understanding of your reporting obligations to the IRS and to foreign jurisdictions will be needed.
- If you relied on a professional advisor, provide the name, address, and telephone number of the advisor and a summary of the advice. Also provide background such as how you came into contact with the advisor and frequency of communication with the advisor.
- If married taxpayers submitting a joint certification have different reasons, provide the individual reasons for each spouse separately in the statement of facts.
For the streamlined foreign offshore procedure, you must submit an original signed Form 14653 and attach copies of the statement to each tax return and information return being submitted through the streamlined procedure. You should not attach copies of the statement to FBARs. Failure to submit this statement, or submission of an incomplete or otherwise deficient statement, will result in returns being processed in the normal course without the benefit of the favorable terms of these procedures.
The best advice that we have for taxpayers is that very careful drafting and persuasive explanation of a taxpayer’s particular circumstances are recommended for a clear demonstration of non-willfulness. Thus, we recommend that you work with a professional firm that is well-versed in the nuances and requirements to drat an effective statement of non-willfulness on the Form 14653. We have the resources to provide you the option of having the statement prepared by a tax professional or with legal representation based on your requirements and preferences.
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Tax Samaritan is a team of Enrolled Agents with over 25 years of experience focusing on US tax preparation and representation. We maintain this tax blog where all articles are written by Enrolled Agents. Our main objective is to educate US taxpayers on their tax responsibilities and the selection of a tax professional. Our articles are also designed to help taxpayers looking to self prepare, providing specific tips and pitfalls to avoid.
When looking for a tax professional, choose carefully. We recommend that you hire a credentialed tax professional such as Tax Samaritan that is an Enrolled Agent (America’s Tax Experts). If you are a US taxpayer overseas, we further recommend that you seek a professional who is experienced in expat tax preparation, like Tax Samaritan (most tax professionals have limited to no experience with the unique tax issues of expat taxpayers).
Randall Brody is an enrolled agent, licensed by the US Department of the Treasury to represent taxpayers before the IRS for audits, collections and appeals. To attain the enrolled agent designation, candidates must demonstrate expertise in taxation, fulfill continuing education credits and adhere to a stringent code of ethics.
Every effort has been taken to provide the most accurate and honest analysis of the tax information provided in this blog. Please use your discretion before making any decisions based on the information provided. This blog is not intended to be a substitute for seeking professional tax advice based on your individual needs.