Introduction. 

Federal tax law imposes various reporting requirements on U.S. taxpayers (citizens and residents) who have foreign transactions, foreign financial accounts, and/or interests in foreign entities.  Taxpayers who fail to timely and properly file these information returns run the real risk of significant civil penalties for the non-reporting.  However, for almost a decade, the IRS has offered certain qualifying taxpayers limited amnesty to regain compliance—at reduced civil penalty rates—through the Streamlined Filing Compliance Procedures (“SFCP”).

But not all taxpayers qualify for the SFCP.  For example, taxpayers who “willfully” failed to file foreign information returns or pay U.S. tax on foreign income are ineligible.  Moreover, taxpayers who are otherwise eligible may be deemed ineligible if the IRS concludes that the taxpayer’s SFCP submission omits important information.  Because taxpayers have a strong incentive to use the SFCP—as opposed to other methods to regain compliance—the IRS routinely polices the submissions that are made under the program.  The federal district court decision in Jones v. U.S., No. CV-19-04950-JVS (C.D. Cal. May 11, 2020), offers a glimpse into what can potentially go wrong if a SFCP submission is flagged by the IRS for additional review.

FBARs. 

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