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Filing Compliance avoid Harsh IRS penalties

2020 Streamlined Filing Compliance Procedure and the Penalties Associated With It

It is 2020 and the submissions to the Streamlined filing compliance procedure continue to come in. The program launched in September 2011 to help people living outside the United States to resolve issues with delinquent returns. It was modified and amended in 2014 so that its regulations would apply to taxpayers inside the country. 

The procedure offers a more straightforward and more affordable method for qualifying taxpayers and expats who wish to reveal unreported assets and income. Program participants can file tax returns without any hassle and with a chance of having their penalties reduced or waived-off in eligible cases.

Associated penalties with a 2020 Streamlined Filing Compliance Procedure

If a taxpayer fails to file their taxes before the deadline — and has failed to provide a reason for the same — a failure-to-file penalty may apply to them. If taxpayers fail to pay the tax before the issued deadline, a failure-to-pay penalty might also apply. Usually, the failure-to-pay penalty is more than the failure-to-file penalty.

The penalty for the filing date is usually 5% of the unpaid taxes for each month or part of the month where the payment is late. The penalty starts accruing from the date the payment is delayed and does not exceed 25% of the unpaid taxes.

People who fail to pay the tax by the deadline face a failure-to-pay penalty, which amounts to 1/2 or 1% of unpaid taxes. The penalty is applied month after month after the due date passes.

The IRS recommends that taxpayers file their return on time to avoid the failure-to-file penalty. If they cannot pay the taxes by the due date, they should still file the return and arrange for an installment agreement.

Suppose taxpayers can certify under penalty of perjury of being non-willful and have signed “Certification by U.S. Person Residing Outside of the U.S” statement (Form 14653, or 14654 if you are residing in the US, though slightly different rules apply). This form 14653 or 14654 certifies that (1) they are eligible for the program; (2) that all FBAR forms have been filed; and (3) that your failure to file resulted from non-willful conduct. In that case, the IRS can wave off the penalty.

Elimination of risk analysis factor in 2020 Streamlined Filing Compliance Procedure Submissions

The IRS no longer takes into account the intensity at which a 2020 Streamlined Filing Compliance Procedure submission is reviewed; in the previous streamlined program taxpayers were associated with high risk and were subject to a more thorough review of their filed documents. They were even subject to a full examination if specific risk factors such as owning stock in a different country than that of their residence and even having a travel account in another country were present.

For many taxpayers and expats, the new streamlined tax filing program makes way to a great chance to take care of their non-compliance through a quick and reliable process. Besides, the low penalties that are associated with it make the process all the more favorable. 

Taxpayers should make it a point to act promptly as their eligibility for this program depends on their corrective action before the IRS contacts them. If taxpayers can make fair use of the system, then it will help them avoid penalties.

The Impact of COVID-10 On The Programme

On March 25, 2020, the IRS announced the People First Initiative as a part of their response to the coronavirus crisis. The announcement included several steps that could help taxpayers by issuing temporary relief. The People First Initiative by the IRS looked at easing payment guidelines and postponing compliance actions from April 1, 2020, to July 15, 2020.

The program allowed taxpayers to suspend their agreed installments if they could not make payments due to the impact of COVID-19 on the economy. It also halted several new liens (a legal right against assets typically used as collateral for debt) and levies (associated fee with delayed tax payments) initiated by field revenue officers, including seizure of personal residence. The IRS also stopped issuing new automatic, systemic liens and levies.

The People First Initiative also included the suspension of passport certifications to the State Department that were made to prevent seriously delinquent taxpayers from having their passport reissued or get a new passport.

The IRS restated compliance activities after July 15 — which is the end of the People First Initiative Program — and enforcement processes by the government body started resuming collection on a case-by-case basis. However, depending on individual cases, the IRS employees have the discretion to handle unusual situations or hardships faced by taxpayers.

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