About IRS Streamlined Foreign Offshore Procedures
Streamlined Foreign Offshore Procedures (SFOP) are an amnesty program offered by the IRS.
U.S. taxpayers who did not file the FBAR (Foreign Bank Account Reporting, or FinCEN Form 114) or other foreign informational returns when required, and who are not U.S. residents, may be able to use the SFOP to submit their delinquent forms and avoid steep FBAR non-filing penalties. There are strict requirements for SFOP eligibility.
The tax attorneys at Gordon Law Group have years of experience in this niche area of tax law, and we’ve guided countless clients through IRS Streamlined Foreign Offshore Procedures. Read on to see who qualifies and how to submit a successful application!
Who is Eligible for Streamlined Foreign Offshore Procedures?
There are specific requirements a taxpayer must meet in order to use the SFOP. Below is a breakdown of the 3 main requirements. Contact our offshore tax attorneys if you’re still not sure about eligibility.
Unreported Foreign Income
The Streamlined Foreign Offshore Procedures is specifically intended to report offshore (non-US) income and assets. If a taxpayer only has unreported income that was U.S.-sourced, that does not qualify for SFOP.
There are many international-related tax forms, each with different filing requirements. Some must be filed with an annual tax return—such as FATCA (Form 8938)—while others must be filed in addition to an annual tax return—such as FBAR (FinCEN Form 114).
The SFOP may be used when these forms weren’t filed at all, or when they were filed but did not include all the required information.
To qualify for Streamlined Foreign Offshore Procedures, a taxpayer must not be a U.S. resident. Under IRS guidelines, there are 2 non-residency tests that could apply, depending on citizenship status.
U.S. Citizens and Permanent Residents (i.e. Green Card Holders): During at least 1 of the past 3 years, the person did not have an abode in the United States and was not physically present in the United States for at least 330 days of the year.
Non-U.S. Citizens and Non-Permanent Residents: During at least 1 of the past 3 years, the person was not physically present in the United States as determined by the Substantial Presence Test.
Those who don’t meet the non-residency requirement may still qualify for Streamlined Domestic Offshore Procedures.
To use the SFOP, you must certify that the failure to file required forms was non-willful (i.e. unintentional).
If the non-filing was willful, then the Voluntary Disclosure Program is a possible alternative to SFOP. Taxpayers could face criminal tax charges for using Streamlined Foreign Offshore Procedures when they were, in fact, willful in their non-filing or underreporting.
Our attorneys can provide guidance on what the IRS is looking for when determining whether conduct was willful or non-willful.
How to Apply for Streamlined Foreign Offshore Procedures
The complete SFOP application must be sent to the IRS with the following pieces.
Tax Returns for 3 Years
The taxpayer must send 3 original or amended U.S. tax returns.
Information Returns for 3 Years
In some cases, information returns regarding foreign financial interests must also be included for the past 3 years. Some examples include Form 8865, Return of U.S. Persons With Respect to Certain Foreign Partnerships, or Form 3520, Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts.
FBAR (Foreign Bank Account Reporting) for 6 Years
The FBAR, or FinCEN Form 114, reports certain foreign accounts and assets held by U.S. taxpayers. If those assets totaled $10,000 or more at any time in the year, then an FBAR must be filed for that tax year. The Streamlined Foreign Offshore Procedures application includes 6 years of FBARs.
Clients often run into problems trying to track down 6 years’ worth of records from their offshore banks and other accounts. Our attorneys can help you in this process.
Pay Tax Due; There Are NO Penalties to Pay with SFOP!
The taxpayer must pay any overdue tax and interest resulting from foreign income. However, with a successful SFOP application, there are no penalties to pay!
Without the streamlined program, many penalties could apply. The standard FBAR penalty is up to $10,000 per year for non-willful offenses. Other information returns each carry their own non-filing penalties which can be well in excess of $10,000 per year.
Other disclosure options, such as the Streamlined Domestic Offshore Procedures and IRS Voluntary Disclosure Program, still include some penalties, so the Streamlined Foreign Offshore Procedures are often the best option for qualifying taxpayers.
Complete Form 14653, Certification by U.S. Person Residing Outside of the U.S.
Form 14653, Certification by U.S. Person Residing Outside of the U.S., certifies that:
- A taxpayer qualifies for the Streamlined Foreign Offshore Procedures
- All required FBAR forms have now been filed
- The taxpayer was non-willful
This form also includes a narrative explaining the taxpayer’s situation and why the required forms were not submitted previously. Our attorneys have processed hundreds of streamlined applications and can help prepare this important piece.
If Form 14563 is missing or incomplete, the delinquent FBARs and tax returns will be processed without the lenient terms offered by SFOP.
Attorney Fees for Streamlined Foreign Offshore Procedures
The tax attorneys at Gordon Law Group are very experienced with FBARs and streamlined procedures. Hiring an experienced professional can save you a lot of time and hassle with the application process.
We charge a flat fee for Streamlined Foreign Offshore Procedures that includes preparation of all of the required amended tax returns and informational returns.
We will never try to sell you a service you don’t need or convince you to apply for a program that you don’t qualify for. We’ll lay out the facts, walk through your options, and guide you through the process start to finish.
SFOP Process with Gordon Law Group
- First, contact us online or call (847) 580-1279 to schedule a confidential consultation.
- You’ll have a 30-minute consultation with a highly experienced tax attorney. During this time, we’ll learn whether you qualify for SFOP (or other options) and recommend your next steps.
- Once you hire Gordon Law Group, we’ll complete the entire process for you. We’ll even provide guidance to help you track down records from your overseas accounts!
- The IRS can move slowly, but we’ll keep you up to date the entire time until your application is processed (and, hopefully, accepted).
When to Apply for Streamlined Foreign Offshore Procedures
We understand that you may need time to weigh your options. However, when it comes to tax problems, it’s always best to act sooner rather than later.
There’s no telling how long the IRS Streamlined Foreign Offshore Procedures will be available. In fact, the IRS recently shut down another amnesty option—the Delinquent International Information Return Submission Procedures—without warning.
To learn whether you qualify for SFOP, call (847) 580-1279 or contact us online today!