OVDP Streamline Program Requires Taxpayer's NOT Timely File Their 2012 Form 1040?

Where you have a client that you plan to put into the streamlined program, but do not have all the prior year returns prepared by October 15, 2012; you appear not to be able to qualify for the program.  If the taxpayer files their 2012 Form 1040 on time (by October 15), will this disqualify the taxpayer's from the program? 
 
The answer appears to me YES.
 
The Streamline Procedure includes a Questionnaire which must be submitted with the delinquent filings (See Streamlined Filing Compliance Procedures for Non-Resident, Non-Filer Taxpayers Questionnaire), which requires that the taxpayer has not filed a US return since 2009. 

 

Where the taxpayer files their 2012 return on time, they can no longer say that they haven’t filed since 2009.  That, in and of itself, would disqualify the client from the streamlined program. 

The questionnaire specifically asks “Have you filed a U.S. tax return for tax year 2009 or later?”  Then it says if you answered yes to question 2 (the one about filing returns), “any returns submitted through this program will not be eligible for the streamlined processing procedures and will be treated as high risk returns subject to an examination.”

To make matters worse, the questionnaire then asks “Did you rely on the advice of a tax professional for not filing required U.S. tax returns?”  Presumably, that would include 2012 if that return is not filed on time.  So if the Tax Advisor advises this client not to file the 2012 Form 1040, in order to qualify for the Streamline Program; they may be disqualified since they relied on advice from a tax professional for not filing 2012's return?

This appears to be a Systemic Error!

How are you handling this issue in your practices?

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