The IRS is encouraging U.S. taxpayers to come into compliance with their reporting and filing requirements with regards offshore bank accounts and foreign assets. New Streamlined Filing Compliance Procedures have been announced with that goal in mind.
The streamlined procedures require the filing of original (for non-residents) or amended (for residents) tax returns. Such tax returns must not only report whatever foreign source income was generated in each of the applicable tax years but must also properly report any U.S. source income and deductions for each of the applicable tax years.
For eligible U.S. taxpayers residing outside the United States, all penalties will be waived under the streamlined procedures. For eligible U.S. taxpayers residing in the United States, the only penalty under the streamlined procedures will be a miscellaneous offshore penalty equal to 5 percent of the foreign financial assets that gave rise to the tax compliance issue (all income tax related penalties associated with the non-U.S. source income will be waived).