United States: Updated IRS Streamlined Filing Pogram: Snowbirds Beware

Last Updated: October 22 2014
Article by Paul Barba

On October 8, 2014, the IRS issued FAQs clarifying its amnesty programs for non-compliant taxpayers who want to catch-up on their U.S. tax filing obligations.1 These FAQs address the recently amended streamlined filing compliance procedures, offshore voluntary disclosure program (OVDP), and delinquent information return and FBAR submission procedures.2 The FAQs are not relatively enlightening, except for the FAQ on the nonresident streamlined procedures (dubbed the "Streamlined Foreign Offshore Procedures" by the IRS). After briefly summarizing some relevant general rules regarding streamlined, this blog will address the consequences of that FAQ for snowbirds who have not filed during the three-year period for which tax returns must be submitted under streamlined and, according to the IRS, spend too much time in the United States. Ultimately, these snowbirds are ineligible for streamlined and must find an alternative way to catch-up with their U.S. tax filing obligations.

I. Summary of the streamlined program

Effective July 1, 2014, there are two versions of the streamlined filing program: one for non-U.S. residents, the other for U.S. residents. Which version applies depends on the taxpayer's residency under the peculiar rules in the streamlined procedures. Residency is defined in the negative in the eligibility requirements of the nonresident streamlined procedures (the IRS coined it the "non-residency requirement"). Notably, residency under the streamlined program is independent of the general residency rules in the Internal Revenue Code.

Consequently, although taxpayers with a green card are U.S. residents under the general rules of the Code,3 they may be nonresidents under streamlined. Adding insult to injury, the IRS has 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. The non-residency requirement applicable to U.S. citizens or green card holders is relevant to the streamlined procedures for snowbirds, while the non-residency requirement for non-U.S. citizens, non-green card holders is much more humane and does not exacerbate the dilemma created by the other version of the non-residing requirement.4

Under the general streamlined procedures, taxpayers must submit all required tax returns for each of the most recent three years for which the U.S. tax return due date (including extensions) has passed and six years of late FBARs. There is no criminal penalty protection under streamlined, while civil penalty protection is available unless (1) the original tax noncompliance (for nonresidents) or return (for residents) was fraudulent or (2) the FBAR violation (if applicable) was willful.5 A summary of the specific streamlined procedures is below.

1. Non-resident streamlined (or "Streamlined Foreign Offshore Procedures").

To qualify for nonresident streamlined, taxpayers must:

1.1. meet the applicable non-residency requirement (if married taxpayers want to file joint tax returns, both spouses must meet the applicable non-residency requirement);

1.2. have failed to report income from a foreign financial asset and pay U.S. tax, and may have failed to file an FBAR or international information return regarding the foreign financial asset; and

1.3. the failure to file resulted from non-willful conduct.6

U.S. citizens and green card holders meet the non-residency requirement if—in at least one year during the three-year period that tax returns must be submitted under streamlined—they both (A) had a non-U.S. "abode" and (B) were physically outside the United States for at least 330 full days.7 The 330-day prong means that taxpayers can spend up to 35 days (36 days in a leap year!) in the United States and still qualify for nonresident streamlined.

The non-residency requirement explicitly originates from the rules in § 911, commonly known as the "foreign earned income exclusion," and, accordingly, raises the question whether the 35-day rule can be supplemented by the disjunctive clause in § 911(d)(1)(A) for "bona fide" foreign (i.e., non-U.S.) residents who are U.S. citizens or are otherwise residents of certain countries with U.S. income tax treaties.8 That is, one requirement for the foreign earned income exclusion in § 911 is that taxpayers must either be (A) bona fide foreign residents for at least one entire taxable year or (B) meet the 35-day rule (the latter is essentially a safe harbor).9

Before the new IRS FAQ, the streamlined procedures did not explicitly discuss the applicability of the bona fide foreign residence test, but deferred to (and continues to defer to) the rules in § 911 "for purposes of these procedures."10 For example, "abode" has the same meaning for streamlined's non-residency requirement as it does in § 911(d)(3), where an abode is generally a dwelling.11 The new FAQ, however, clarifies that § 911 only applies for purposes of determining a taxpayer's abode—and that the 35-day rule cannot be supplemented by the bona-fide foreign residence test.

Apparently, § 911 does not really apply "for purposes of these procedures," as the streamlined rules state.12 The purpose for the IRS's hard stance in the non-residency requirement is (presumably) that individuals who spend more than 35 days in the United States for the three-year period under streamlined should know their U.S. tax obligations better.13

2. Resident streamlined (or "Streamlined Domestic Offshore Procedures").

To qualify for resident streamlined, taxpayers must:

2.1. fail to meet the non-residency requirement (at least one spouse must fail the non-residency requirement for joint filers);

2.2. have previously filed a U.S. tax return (if required) for each year during the three-year period that tax returns must be submitted under streamlined;

2.3. have failed to report income from a foreign financial asset and pay U.S. tax, and may have failed to file an FBAR or international information return regarding the foreign financial asset; and

2.4. the failure to file resulted from non-willful conduct.14

The third requirement is particularly noteworthy for snowbirds who have not filed a U.S. tax return for the three-year period under streamlined, because it essentially disqualifies them from resident streamlined. The resident streamlined procedures are abundantly clear on this: taxpayers "may not file delinquent income tax returns (including Form 1040, U.S. Individual Income Tax Return)" under resident streamlined.15

II. No streamlined for snowbirds who need to file late forms 1040

The IRS's new FAQs clarify that snowbirds who do not meet the 35-day rule and need to file late Forms 1040 do not qualify for streamlined (under both the resident and non-resident versions of the program). The IRS FAQ on nonresident streamlined provides that non-residency under the nonresident streamlined procedures is defined in the procedures, not in § 911 and its regulations, except for purposes of determining a taxpayer's abode.16 These snowbirds must explore the new 2014 OVDP or alternative (and less-certain) means of becoming compliant with their U.S. tax filing obligations.

To qualify for nonresident streamlined, noncompliant taxpayers must meet the non-residency requirement; that is, they must have spent 35 days at most in the United States for at least one tax year during the relevant three-year streamlined period and meet the non-U.S. abode requirement to qualify for the amnesty program. To make matters worse, noncompliant taxpayers who do not meet the non-residency requirement cannot file late income tax returns (e.g., Form 1040) under resident streamlined. Consequently, many non-filer snowbirds who migrate to the United States for what most would consider an insignificant amount of time—e.g., 36 days every year—will not qualify for streamlined.

II.1. Example: Mr. Snowbird's yearly migrations to the United States

For example, take the typical Canadian snowbird, Mr. Snowbird, who is physically present in Canada for 10 months and in the United States for 2 months at his vacation home every year during the relevant three-year streamlined period. Mr. Snowbird is a dual citizen of Canada and the United States, conducts all of his business in Canada, has no significant U.S. investments other than the vacation home, and has never filed U.S. tax returns (although he was required to do so).

Unfortunately, Mr. Snowbird does not qualify for nonresident streamlined because he spent over 35 days every year during the relevant three-year streamlined period and therefore, fails the non-residency requirement. Mr. Snowbird also does not qualify for resident streamlined because he has never filed a U.S. tax return. Notably, under the old streamlined rules, it was generally understood that a taxpayer like Mr. Snowbird would be permitted to submit returns under streamlined since he did not meet the substantial presence test and would qualify as a Canadian resident under the U.S.-Canada tax treaty.17 According to the IRS, Mr. Snowbird's only recourse for voluntary disclosure, and the applicable amnesty that accompanies it, is under the new 2014 OVDP, where he must pay at least a 27.5% penalty on his foreign assets.

Alternatively, Mr. Snowbird could file his late U.S. tax returns and attach reasonable cause arguments as appropriate; however, it is unclear how far back in time he must go when filing his late U.S. tax returns. Under streamlined and OVDP, Mr. Snowbird generally must file for three years and eight years, respectively. If he does not use one of these amnesty programs, there is no guidance limiting his filings to a specified number of years. Let us assume that Mr. Snowbird was born in Canada and obtained his U.S. citizenship derivatively through a U.S.-citizen parent, and did not know he was a citizen until 2014.18 He has never had a U.S. passport and does not have a U.S. Consular Report of Birth Abroad.

Thus, if Mr. Snowbird does not use OVDP, there is no telling how far back he must file late U.S. tax returns to become compliant with his filing obligations. If only nonresident streamlined's non-residency requirement or resident streamlined's U.S. tax return requirement were more accommodating to snowbirds like him.

Also note that nonresident taxpayers must certify under penalties of perjury that they meet the eligibility requirements for nonresident streamlined—which include the non-residency requirement—on their streamlined certification form. Consequently, Mr. Snowbird would be ill-advised if he chooses to misrepresent his residency on his certification form because he could face criminal prosecution for doing so.19

III. Conclusion

As the example above illustrates, the IRS's position on a snowbird's eligibility for streamlined is rather ominous. 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—both the resident and nonresident flavors of the program—and the imposition of a 27.5% (or 50%) penalty under OVDP? That seems to be a draconian result, especially for taxpayers who spend two months or less in the United States every year.

This result certainly will not encourage compliance and is inconsistent with IRS Commissioner Koskinen's rationale for expanding the streamlined program and the significant tightening of OVDP.20 Hopefully, the IRS will reexamine its streamlined requirements to explicitly qualify noncompliant, non-filer taxpayers like Mr. Snowbird for streamlined. If the IRS truly wants to encourage voluntary disclosure, it could (at the least) allow taxpayers to file late income tax returns under its resident streamlined program. A 5% penalty under resident streamlined is certainly more palatable than a 27.5% (or 50%) penalty under OVDP, and is a fairer result for taxpayers who spend relatively trifling amounts of time in the United States every year.


1 These FAQs can be accessed by navigating the links on this page: http://www.irs.gov/Individuals/International-Taxpayers/Options-Available-For-U-S–Taxpayers-with-Undisclosed-Foreign-Financial-Assets.

2 For previous analysis, refer to Paul Barba, Amended IRS Disclosure Programs Expand Eligible Taxpayers But Create the Canadian Snowbird Dilemma: Part 1 (July 7, 2014) available at http://www.moodysgartner.com/amended-irs-voluntary-disclosure-programs-expand-eligible-taxpayers-but-create-the-canadian-snowbird-dilemma-part-1/.

3 I.R.C. § 7701(b)(1); Treas. Reg. § 301.7701(b)-1. But see Treas. Reg. § 301.7701(b)-7(a)(3).

4 Accordingly, the rules applicable to non-U.S. citizen, non-green card holders will not be discussed here. For more, refer to Paul Barba, supra note 2.

5,6,7 IRS, Streamlined Filing Compliance Procedures (Oct. 9, 2014), available athttp://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures [hereinafter General Streamlined]; IRS, U.S. Taxpayers Residing Outside the United States (Oct. 9, 2014), available athttp://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States [hereinafter Nonresident Streamlined]; IRS, U.S. Taxpayers Residing in the United States (Oct. 9, 2014), available athttp://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States [hereinafter Resident Streamlined].

8 Nonresident Streamlined, supra note 5.

7 Nonresident Streamlined, supra note 5; § 911(d)(3) (last sentence); Treas. Reg. § 1.911-2(b); IRS Publication 54 (Dec. 3, 2013), chapter 4, available athttp://www.irs.gov/pub/irs-pdf/p54.pdf. See also § 911(d)(1).

8 Rev. Rul. 91-58, 1991-2 C.B. 340 (the IRS ruled that U.S. residents are allowed to use the bona fide foreign residence test for purposes of § 911 under the nondiscrimination articles of certain U.S. income tax treaties, including the U.S.-Canada treaty).

9 § 911(a), (d)(1).

10 Nonresident Streamlined, supra note 5.

11 Treas. Reg. § 1.911-2(b).

12 Resident Streamlined, supra note 5.

13 See Amy S. Elliott, IRS Answers Questions on Updated OVDP and Streamlined Filing, 2014 Tax Analysts W.T.D. 120-3 (June 23, 2014) (statement by Jennifer Best, senior advisor, IRS Large Business and International Division, that "if you're spending a substantial amount of time in the United States . . . you need to be responsible with respect to your tax obligations." ).

14 Resident Streamlined, supra note 5.

15 Resident Streamlined, supra note 5.

16 IRS, Streamlined Filing Compliance Procedures for U.S. Taxpayers Residing Outside the United States Frequently Asked Questions and Answers (Oct. 8, 2014) available at http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures-for-U-S–Taxpayers-Residing-Outside-the-United-States-Frequently-Asked-Questions-and-Answers.

17 § 7701(b)(3); Convention Between the United States of America and Canada with Respect to Taxes on Income and on Capital, U.S.-Can., Article IV(2), Sept. 26, 1980, T.I.A.S. 11087.

18 8 U.S.C. § 1401(g).

19 E.g., § 7206(1); 18 U.S.C. § 1001.

20 Statement of IRS Commissioner John Koskinen (June 18, 2014), at p.2, available athttp://www.irs.gov/uac/Newsroom/Statement-of-IRS-Commissioner-John-Koskinen.

Moodys Gartner Tax Law is only about tax. It is not an add-on service, it is our singular focus. Our Canadian and US lawyers and Chartered Accountants work together to develop effective tax strategies that get results, for individuals and corporate clients with interests in Canada, the US or both. Our strengths lie in Canadian and US cross-border tax advisory services, estateplanning, and tax litigation/dispute resolution. We identify areas of risk and opportunity, and create plans that yield the right balance of protection, optimization and compliance for each of our clients' special circumstances.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Paul Barba
Events from this Firm
1 Dec 2018, Seminar, Toronto, Canada

On Dec. 22, 2017, President Trump signed into law the biggest US tax reform bill in 31 years, changing the lives of Americans at home and abroad.

5 Dec 2018, Webinar, Calgary, Canada

This technical session will be of interest to advisors to private businesses (accountants, lawyers, investment and insurance advisors, bankers, trust officers and others) and business owners

6 Dec 2018, Webinar, Calgary, Canada

This 90-minute session will review last-minute planning for owner-managers and their advisors to consider before January 1, 2019.

Similar Articles
Relevancy Powered by MondaqAI
Collins Barrow National Incorporated
Shearman & Sterling LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Collins Barrow National Incorporated
Shearman & Sterling LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions