The Hunt For Snowbirds Is On – A Summary of The IRS’s FAQ On Amnesty Programs For Non-Compliant Taxpayers

TaxConnections Picture - Question Mark - Colorful Cubes - square

Since announcing its amnesty programs for non-compliant taxpayers, the IRS has received over 45,000 applications from those who wanted to fulfil tax filing obligations. According to the IRS, this meant $6.5 billion in taxes, interest, and penalties. With FATCA and global bank transparency also in action, the IRS is expecting even more mula from the pockets of expats with foreign accounts.

Why are so many U.S. taxpayers willingly complying? Because the new streamlined program is broader than it was back in 2012. The revamped version even eliminates the necessary risk questionnaire and the rule that taxpayers have $1,500 at most of unpaid taxes per year. Even “better” is the fact that taxpayers can provide a non-willful certification to justify their failure to report their foreign assets in the past. If a taxpayer is found eligible:

• For the Streamlined Foreign Offshore Procedures, the offshore penalty is automatically waiver.

• For the streamlined Domestic Offshore Procedures, he or she must pay an offshore penalty consisting of 5% of their foreign financial assets.

While the penalty structure is far more desirable than what can be expected under OVDP, qualifying for the streamlined procedures, on the other hand, is a “whole nother story.” To say that it was a tad difficult would be like saying that “Moaning Myrtle,” the ghost who haunts the girls’ bathroom at Hogwarts in “Harry Potter,” is a little emotional.

Take, for example, the streamlined domestic offshore procedures. A person is ineligible for the streamlined domestic offshore procedures if he has not previously filed a U.S. tax return for the last three years by the regularly scheduled due date (i.e., April 15 of the following year) or by the extended due date which the taxpayer requested and the IRS granted.

In order to provide guidance on the eligibility requirements, back on October 8, 2014, the IRS issued a FAQ that addresses the amended streamlined filing compliance process as well as FBAR submissions, delinquent information returns, and the offshore voluntary disclosure program (OVDP). Unfortunately for snowbirds, the FAQs show that the IRS has started hunting them.

If you are a U.S. citizen or a green card holder, have spent a little too much time “south of the border” in the U.S., and haven’t filed your taxes during the three-year period covered by the streamlined procedures, your goose is plucked and ready to cook unless you find another way to catch up with your taxes.

A Look at the Hunter’s Manual

According to the October 2014 FAQs, taxpayers must comply with one of two different versions of the streamlined filing procedures: one for non-U.S. residents, aptly referred to as the “Streamlined Foreign Offshore Procedures” and the other for U.S. residents, aptly referred to as the “Streamlined Domestic Offshore Procedures.” Which category (and ultimately streamlined filing program) you fit in depends on your residency under what are some rather “odd” rules in the streamlined procedures.[i]

While the concept of “residency” might appear to be as straightforward as the story of “Humpty Dumpty,” the streamlined procedures have contorted the definition of this four-syllable word to such an extent that it requires scribes to decipher its true meaning. Some have called it “a riddle wrapped in a mystery inside an enigma.” Indeed, deciphering the true meaning of “residency” might be just as difficult as conquering the “Triwizard Maze,” the third task of the “Triwizard Tournament” in “Harry Potter and the Goblet of Fire.”

The source of this confusion lies in the fact that the definition of “residency” under the streamlined procedures is radically different than the general definition of “residency” in the Internal Revenue Code.[ii] For example, while green card holders are classified as “U.S. residents” under the Code, the same may not be true under the streamlined procedures.[iii] Instead, they may be considered “nonresidents.”[iv]

Adding to the confusion is the fact that there are two different non-residency requirements: “one for U.S. citizens or green card holders, and the other for non-U.S. citizens, non-green card holders.”[v]

The non-resident dilemma rears its ugly head in the context of the streamlined foreign offshore procedures. In order to understand how, one must have a solid understanding of the non-residency requirement under the streamlined foreign offshore procedures.

To be eligible for the streamlined foreign offshore procedures, taxpayers must satisfy the IRS non-residency requirement. This is code for the following: (1) having a non-U.S. abode and (2) spending 330 full days or more outside the U.S. in just one year during the three-year period that tax returns must be submitted under streamlined. Which year you crossed the 330-day threshold – whether it be the first year, the second year, or the third year of the look-back period – is meaningless so long as it happened during one of these years.

The practical implication of the second prong of the non-residency requirement is that taxpayers who otherwise hold green cards or satisfy the general rules for residency under IRC 7701(b)(1) of the Internal Revenue Code (i.e., substantial presence test), might nonetheless be considered “nonresidents” for purposes of the streamlined procedures. But this is not a bad thing. On the contrary, those taxpayers who satisfy the nonresidency requirement might just as well be dancing to the tune of, “Oh Happy Day,” since their day has gotten a lot brighter with news that their offshore penalty has been waived.

Right about now, you might be asking yourself the question, “Did I hear you correctly? There is no offshore penalty under the streamlined foreign offshore procedures? You must be pulling my leg!” No, you heard correctly. There is no offshore penalty. Nor are there any other “hidden” civil penalties. On the contrary, taxpayers enjoy absolute immunity from all civil penalties so long as: (1) the original tax noncompliance (for nonresidents) or return (for residents) was not fraudulent and (2) the FBAR violation was not willful.[vi]

But it is not all wine and roses. This is why it is always important to read the fine print. First and foremost, taxpayers must be reminded that there is no immunity from prosecution under the streamlined procedures. Second, in the event that the IRS rejects a streamlined submission, the taxpayer is ineligible from applying to its sister program – the Offshore Voluntary Disclosure Program (OVDP) – regardless of what that reason might be. Third, just as the non-residency requirement can be the cause for celebration for those who satisfy its rigid requirements, it can also be the cause of despair for those who don’t. In that sense, it has been known to play the role of “spoiler” – not unlike the “… Mean One Mr. Grinch” – to well-intentioned taxpayers wanting to “get right” with the IRS.

There is no larger segment of the U.S. taxpayer population that is directly impacted by the non-residency requirement (and that, incidentally, comes up on “the short end of the stick”) than “snowbirds.” By snowbird, I am affectionately referring to those individuals who hold dual-citizenship with the U.S. and Canada (or merely green card holders) who like to migrate south during the unbearably cold and desolate months of winter to lie on a sun-drenched beach in Florida while kicking up their heels and sipping a Pina Colada.

If you are a self-proclaimed snowbird, you may no longer be singing along to the tune of “Hakuna Matata” after hearing this. Why? Because you’ve had the misfortune of being placed by the snarky “sorting hat” of the IRS (not of Hogwarts) in the first category of non-residency, the requirements of which are all but impossible to satisfy. Indeed, such a classification is just as undesirable to a taxpayer with unreported foreign assets as the label “Slytherin” is to a young wizard who had his heart set on being placed in “Gryffindor” house (but the sorting hat had something else in mind).

Below is a more detailed discussion of this dilemma, along with a summary of the streamlined procedures in light of the FAQs.

For Non-Resident Streamlined

To qualify for the streamlined foreign offshore procedures, a taxpayer must satisfy the following requirements: a) the non-residency requirement (both spouses must satisfy this requirement if filing jointly); b) have failed to disclose income from a foreign financial asset and failed to file an FBAR or international information return relating to the asset in question; and c) have certified that the failure to file resulted from non-willful conduct.[vii]

For a U.S. citizen or green card holder to be considered a non-resident, they must satisfy two requirements. First, their “abode” (the aristocratic word for, “home”) must have been located outside the U.S. And second, they must have spent no more than 35 days in the U.S. in at least one year during the three-year period covered by the streamlined procedures.[viii] As discussed above, this can be quite confusing since residency is defined in the negative.[ix]

This is as good a time as any for a slight digression into the non-residency requirement. The requirement has its origin in § 911, the “foreign earned income exclusion,” a web so tangled that it might just as well have been spun by the 800-pound flesh-eating tarantula named “Aragog” in “Harry Potter.” Because the IRS kept on linking its streamlined processes with § 911, many believed that they could be eligible for the foreign earned income inclusion.

For those unfamiliar with the foreign earned income exclusion, it excludes from U.S. taxation a limited amount of foreign earned income plus a housing cost amount. The foreign earned income exclusion is available only to U.S. citizens or resident aliens who satisfy the following requirements:

1. The individual is physically present in a foreign country for at least 330 full days during a 12-month period or, in the case of a U.S. citizen, is a bona fide resident of a foreign country for an uninterrupted period that includes an entire taxable year, and

2. The individual’s tax home is in a foreign country.[x]

Whether a person is a bona fide foreign resident is determined by his intentions with regard to the length and nature of the stay. Factors which suggest that a person is a bona fide resident include the following: (i) the presence of family, (ii) the acquisition of a foreign home or long-term lease, and (iii) involvement in the social life of the foreign country.

With respect to the second requirement, an individual’s tax home is his principal or regular place of business.[xi] Fortunately, the definition of “non-U.S. abode” under the streamlined non-residency requirement is identical to the latter definition.

A Word of Caution

The unveiling of these new FAQs reveals that § 911’s applicability to the streamlined procedures is limited. As discussed above, it can only be relied upon for purposes of determining the location of a taxpayer’s abode. Stated otherwise, the bona fide residence test of § 911 cannot be used as a substitute for the 35-day test in order to save a “wounded” snowbird who has failed that test from a terrible fate: loss of eligibility for the streamlined foreign offshore procedures.

Another way of looking at this is that the IRS has been aiming at you for quite some time before allowing the black powder to bring you down. Some chalk up the IRS’s rigid position to the fact that taxpayers who stay in the U.S. for more than 35 days in any single year during the three-year period should be more aware of their tax obligations.

For Resident Streamlined

To qualify for the streamlined domestic offshore procedures, a taxpayer must satisfy the following requirements: a) failed the non-residency requirement; b) filed a U.S. tax return for each year during the three years mentioned in the procedures; c) failed to report foreign income and failed to file an FBAR; and d) have certified that the failure to file resulted from non-willful conduct.[xii]

For a snowbird, requirement “b” is the most important. Why? Because if you have not filed a U.S. tax return for the three-year period under streamlined, you will suffer a similar fate to the one suffered by Hagrid in “Harry Potter.” The only difference is that instead of being banned from using magic, you will be banned from making a submission under the streamlined domestic offshore procedures.

Unfortunately, the resident streamlined procedures explicitly state that delinquent tax returns are not permitted.[xiii]

An Example to Drive It Home

To illustrate how the 35-day rule works in the “real world,” as opposed to the wizarding world where we, muggles, are not welcome, consider the following example[xiv]:

John is a dual citizen of the U.S. and Canada whose permanent residence is in Canada. He is a small-business owner who conducts all of his business in Canada but who owns a piece of real estate in the United States: a vacation home in Florida. John has several bank accounts – both personal and business – with Canadian banks, the maximum aggregate balance of which well exceeds $ 10,000 (USD).

John was born on Canadian soil and not unlike many snowbirds, obtained his U.S. citizenship derivatively through his parents, who are U.S. citizens. Because he only recently learned that he was a U.S. citizen, John never filed any U.S. tax returns.

Over the last three years, John spent the following time at his vacation home in Florida: 40 days in 2011, 50 days in 2012, and 30 days in 2013. John has decided to make a streamlined foreign offshore submission and does so on November 15, 2014.

Let’s analyze this fact-pattern. As a preliminary matter, it is necessary to determine what the three-year period is for which tax returns must be submitted under streamlined. Because John made his submission before the due date for his 2014 tax returns (i.e., April 15, 2015), the three-year look-back period for which he must file tax returns includes the last three tax years: namely, 2011, 2012, and 2013.

In order for John to satisfy the non-residency requirement, he must have spent a minimum of 330 full days in Canada in just one of the three years during the three-year look-back period. Any year is fine. John does not satisfy the non-residency requirement in two of the three years – namely, tax years 2011 and 2012 – because he spent less than 330 days in Canada and more than 35 days in the U.S. in each of these years. Specifically, in 2011, John spent 325 days in Canada, five less than the minimum amount required. And in 2012, he spent 315 days in Canada, fifteen days less than the minimum amount required.

While things might appear as bleak for John as they would for a wizard who has the misfortune of being in the company of a soul-sucking “Dementor,”[xv] all hope is not lost. Just like Harry Potter, John can use his “Patronus Charm” to cast away the darkness. How you might ask? Because John spent 335 days in Canada in 2012 (five more than the 330-day threshold), he still satisfies the non-residency requirement and therefore, is eligible for the streamlined foreign offshore procedures (assuming, of course, that John can legitimately certify that his conduct in failing to report his Canadian bank accounts was, “non-willful”).

This leads to an important point. A taxpayer could flunk the non-residency requirement – in grand fashion – in two of the three years but still pass it with flying colors so long as he has spent at least 330 days abroad and no more than 35 days in the U.S. (36 days in a leap year) in just one of the three years. In that case, the taxpayer would have made it to the “promise land,” albeit by the hair of his “chinny chin chin.” The hypothetical above is a perfect example.

At the same time, a far more sinister fate could have befallen John if he had spent just six more days in the U.S. in year 2013. If so, his “Patronus Charm” would not have saved him from an outcome as bleak as the one suffered by the victims of a Dementor: tortuous ruin. In that case, he’d have failed the non-residency requirement by virtue of having spent 36 days in the U.S. in 2013 and 329 days in Canada, one day shy of the 330-day minimum. And if he fails the non-residency requirement, not only would John be ineligible for the streamlined foreign offshore procedures, but he would also be ineligible for the streamlined domestic offshore procedures since he has never filed any U.S. tax returns.

What does this mean? To the extent that John still wants to “come clean” through the IRS’s voluntary disclosure program, he has only one remaining option: apply to the Offshore Voluntary Disclosure Program, where he must pay a draconian penalty of at least 27.5% on the maximum aggregate balance of his foreign assets over an eight year look-back period.

It seems unfair that non-filers like John who spend such an insignificant amount of time in the U.S. every year should be saddled with a 27.5% penalty merely because they spent the winter months in the U.S. The issue was best framed by Paul Barba in his blog, Updated IRS streamlined filing program: snowbirds beware: “Does physical presence exceeding 35 days every year justify the disqualification of noncompliant taxpayers who have spent relatively small amounts of time in the United States every year from streamlined … and the imposition of a 27.5% (or 50%) penalty under OVDP?”

Not surprisingly, this has been enough to start the fire under the goose of many a snowbird whose only shot at qualifying for streamlined was under the streamlined foreign offshore procedures.

There is an important lesson to be learned in all of this, one that might be even more important than the lesson taught by Professor Snape in his “Defense Against the Dark Arts Class.” And that lesson is that “non-filer” snowbirds who migrate south of the border for what might seem like an insignificant period of time (i.e., 36 days every year for the last three years) will be ineligible for all forms of streamlined, regardless of the type.

Aimed at, Fired at, But Still Escaped (Barely)

Before you become the next bird gracing the IRS’s table, you need to know what you’re up against. If you don’t satisfy the 35-day rule and haven’t filed returns, you are ineligible for either type of streamlined program. In that case, you should talk to your tax attorney about the 2014 OVDP or an alternative that would allow you to become compliant with your tax filing obligations.

Summing everything up, if you spent more than 35 days in the U.S. during just one year of the streamlined period, you’ll fail the extremely confusing non-residency requirement of streamlined foreign in the same way that Fleur Delacour, Viktor Krum, and Cedric Diggory went down in flames in the “Triwizard Tournament” in “Harry Potter.” And if you haven’t filed tax returns during that same period, you might just as well as had the misfortune of being hit by the “Cruciatus Curse,” a curse that inflicts such excruciating pain on its victims that it tortures them into insanity.

Those taxpayers that find themselves in the untenable position of being ineligible for streamlined are left with only three options: (1) filing amended returns along with delinquent FBARs accompanied by arguments in support of reasonable cause, in what is referred to in tax jargon (and not “Parseltongue,” the language of serpents and those who can converse with them) as a “quiet disclosure”; (2) seek shelter in the OVDP bunker where an onerous 27.5% penalty lies in wait like a piranha waiting in the shallows to devour the next unsuspecting fish that swims by; or (3) do nothing

As tempting as it might be to choose options (1) or (3), be aware of the consequences. Indeed, while OVDP could leave you with nothing more than the shirt on your back, a quiet disclosure could be more painful than a root canal.

As discussed time and time again, the most serious risk of making a quiet disclosure is a referral to the Criminal Investigation Division of the IRS. While the likelihood of such a referral might be slim to remote, the likelihood of multiple FBAR penalties isn’t. If recent cases are any indication, not only has the IRS been clamping down on those who have attempted to make quiet disclosures by asserting multiple willful FBAR penalties that would be enough to make Warren Buffet cry “uncle,” but it has been doing so with impunity.

For those who might question the legality of this, unfortunately, for as malicious and mean-spirited as it might seem, the IRS has support for its position. Indeed, it has wrapped itself in the “invisibility cloak” (the magical garment which renders whatever it covers “unseeable”) of recent circuit court decisions that have diluted the quantum of proof needed to establish “willfulness.” Therefore, it should come as no surprise that the IRS has been asserting willful FBAR penalties more aggressively now than it has ever done so before.

Keep in mind, however, that should a taxpayer challenge such an assertion, it would be the equivalent of putting the IRS’s feet to the fire. Why? At the end of the day, it is not the taxpayer who must prove that his conduct was non-willful in order to get out from under the onerous willful FBAR penalty. Instead, as was illustrated in the Zwerner case, it is the IRS that must prove willfulness. And while willfulness need only be proven by clear and convincing evidence in the civil context, the fact remains that proving the existence of a mental state is often times easier said than done. Moreover, that is an issue for the jury to decide.

Lastly, if you were thinking about misrepresenting your residency in order to qualify for the streamlined foreign offshore procedures, you best think twice. Why? Nonresident taxpayers must certify under penalties of perjury not only that their failure to report their foreign accounts was non-willful, but that they satisfy the eligibility requirements for the streamlined foreign offshore procedures.[xvi]

Because the eligibility requirements include the non-residency requirement, the certification applies just as much to non-residency as it does to non-willfulness. Therefore, a taxpayer who misrepresents his residency on his certification could potentially be prosecuted in the same way as a willful taxpayer who misrepresents non-willfulness in order to bootstrap himself into the streamlined program.[xvii]

The lesson here is not to be as foolhardy as to attempt to fit a “square peg into a round hole.” Instead, exercise prudence and caution before outright rejecting the only thing that might be standing between you and a cold, dank jail cell: OVDP. Needless to say, you don’t want to be what’s cooking next in the IRS’s oven on Thanksgiving Day.

Original Post By:  Michael DeBlis



[i] Updated IRS streamlined filing program: snowbirds beware, p. 1, Moodys Gartner, Barba, Paul, available at

[ii] Updated IRS streamlined filing program: snowbirds beware, p. 1, Moodys Gartner, Barba, Paul, available at

[iii] See Footnote (i).

[iv] See Footnote (i).

[v] See Footnote (i).

[vi] See Footnote (i).

[vii] IRS, Streamlined Filing Compliance Procedures (Oct. 9, 2014), available at; IRS, U.S. Taxpayers Residing Outside the United States (Oct. 9, 2014), available at

[viii] IRS, Taxpayers Residing Outside the United States; § 911(d)(3) (last sentence); Treas. Reg. § 1.911-2(b); IRS Publication 54 (Dec. 3, 2013), chapter 4. See also § 911(d)(1).

[ix] See Footnote (i) at p. 1.

[x] § 911(a), (d)(1).

[xi] § 911(d)(3).

[xii] IRS, U.S. Taxpayers Residing in the United States (Oct. 9, 2014), available at

[xiii] See Footnote (xii), U.S. Taxpayers Residing in the United States (Oct. 9, 2014).

[xiv] This example is based on the one given by the author of the article cited in Footnote (i) with some variations.

[xv] Dementors feed upon human happiness, and thus cause depression and despair to anyone near them. They can also consume a person’s soul, leaving their victims in a permanent vegetative state, and thus are often referred to as “soul-sucking fiends” and are known to leave a person as an “empty self.”

[xvi] See Footnote (i) at p. 4.

[xvii] Id.

As a former public defender, Michael has defended the poor, the forgotten, and the damned against a gov. that has seemingly unlimited resources to investigate and prosecute crimes. He has spent the last six years cutting his teeth on some of the most serious felony cases, obtaining favorable results for his clients. He knows what it’s like to go toe to toe with the government. In an adversarial environment that is akin to trench warfare, Michael has developed a reputation as a fearless litigator.

Michael graduated from the Thomas M. Cooley Law School. He then earned his LLM in International Tax. Michael’s unique background in tax law puts him into an elite category of criminal defense attorneys who specialize in criminal tax defense. His extensive trial experience and solid grounding in all major areas of taxation make him uniquely qualified to handle any white-collar case.



  1. trishmoon says:


    Do you not mean, in paragraph 7 under “An Example to Drive It Home” that John has spent 335 days in Canada in 2013?

    Because John spent 335 days in Canada in 2012 (five more than the 330-day threshold), he still satisfies …..

    Otherwise I am more confused than ever………

    • Mike says:

      My apologies. You are correct. I meant to say, “335 days in Canada in 2013” (not 2012). I hope that clears things up. Thanks for bringing it to my attention.

Leave a Reply

Your email address will not be published. Required fields are marked *

18 − four =