DELINQUENT? Who, Me?

Last week, I, ah …… hey, is it just me or is time really flying in this new year of 2015?  Already, most of this new week has passed us by like a sidewalk motorcyclist at an Edsa rush hour?  (Oh yes, I know that “Edsa traffic” and the word “rush” go together like “balut” and “egg whites,” but you get the idea – and that’s what counts.)

Let’s get right “tuit” then, before the publisher comes knocking.  (Everyone should know what a “tuit” is. For those moving slowly today, I’ll explain that a “tuit” is a powerful motivational object.  Most work on earth is accomplished whenever the laborers get a round one.)

MORE Q&A

As I was saying, last week I mentioned two questions that were statistically tied in the number of times that they had been voiced over the past couple of months.  We talked about one.  Now, it’s the other’s turn in print.  Though you may not imagine it to be of such great importance, various changes in the world entwined in economics and administration and taxes serve as this question’s “tuit”

Q:  With all of these acronyms flying about, like FATCA, ACA, and others, I’m getting scared.  The U.S. has put its worldwide reporting and information collection system in operation about a month ago, and here I am in the Philippines without having filed any U.S. Income Tax returns for a very long time. I didn’t know that I still had to file them since I live here, but now I hear the tsismis about the long arm of the IRS stretching out even farther.  What can I do so that my chances of being discovered are zero?

A:  THIS IS A REAL PROBLEM, and it’s much more common than you can imagine.  I know that some of you, dear readers, may be trembling a bit and might be in the same position.  Are there any answers to this one?

Yes, there are a lot of answers.  Just talk with anyone about it, and you’ll either hear an old one or an ingenious but skillfully wrong new one.  It’s time to dispel some of the troubling bogus answers and help get the word out on how a taxpayer with delinquent returns can “get current” with their income tax responsibilities.

1.  Letting go of the past, turning a new leaf, and starting to file returns starting with this year and trying not to miss any future years.

BAD NEWS.  Following this answer merely raises a red flag when that first in a long time tax return hits the return processor’s desk.  The taxpayer’s name and Tax ID Number are the first items entered into the dreaded IRS computer system.  It’s programmed to recognize what’s happening, there being no record of tax returns being filed for some period of time.  This taxpayer’s return gets an immediate pass to an auditor’s desk, where further investigation starts as the return is being processed. That computer, by the way, will automatically generate a form letter and send it to the taxpayer, asking, “WHAAAZZUPP?”  It’s the start of a new adventure, better described as an ordeal.  You DON’T want to go there.

2.  Gathering all of the old information that can be found and quietly filing all of those delinquent returns right before filing the current year’s tax return.

A LITTLE BETTER, BUT NOT MUCH. Yes, the “quietly catch up” artist has an extremely slim chance of “slipping one by the man,” but remember that computer system I mentioned?  It has a programmed response for that move, too – especially if a big lump of delinquent returns hits the in baskets almost all at once or not spaced out by some reasonable amount of time, say, one year between returns.  It’s made very much worse if any taxes were due with those returns.  Trouble for taxpayers compounds faster at the IRS than interest on a savings account.  Now, we’re talking about the possibilities of penalties, interest, and possible fines and jail time (in the really bad cases).  You DON’T want to go there.

IS THERE ANY WAY THAT’S SAFE? one might ask.  Well, there’s one way that I recommend to delinquent return laden taxpayers who failed to meet their tax return – and FBAR reporting – responsibilities for a while, and their lack of filing those returns and reports wasn’t intentional or purely neglectful.  If “intent” and “pure negligence” are part or all of the rationale employed over the years then, for this recommendation, “FUGGEDDABOUTIT!” Such delinquent return owners can only “come clean,” voluntarily disclose their prior mischief, and be prepared to take their lumps.  They’ve entered the dark world of tax evasion, where even the publicity can be punishing.

The answer that’s available for the unintentional, simply careless taxpayer who failed to timely file income tax returns and FBAR reports in the past is called the Streamlined Foreign Offshore Procedures, for those residing outside of the U.S., and the Streamlined Domestic Offshore Procedures for U.S. residents.  These are fine programs developed to bring non-compliant taxpayers current.

Now that I’ve piqued your interest, you have something to think about (and, perhaps, Google) until this article continues next week. (Just like in the old matinée serials on Saturday afternoons of yore, the story gets continued just when it starts getting good.) For now, I have to get back to the “big computer” and get some tax work done.   The clock, and the word counter on this publishing medium, have presented me with a “tuit.”

Yes, it’s round.