- 1 IRS Streamlined Domestic Offshore Submissions
- 2 (SDOP) Streamlined Domestic Offshore Lawyers – Golding & Golding, Board-Certified Tax Law Specialist Team
- 3 Common Mistakes in Streamlined Domestic Offshore Submissions (SDOP)
- 4 Foreign Pension is not Identical to a 401K
- 5 Understanding PFIC Reporting Exceptions
- 6 PFIC Reporting Non-Exceptions
- 7 Disregarding a Per Se Corporation
- 8 Incorrectly Filing a Dormant 5471
- 9 Interested in the Streamlined Domestic Offshore Procedures?
5 Common Mistakes in Streamlined Domestic Offshore Submissions
The IRS Streamlined Domestic Offshore Procedures (SDOP) are a very complex type of IRS offshore submission. By submitting to the Streamlined Domestic Offshore Procedures, you are making proactive representations to the IRS, under penalty of perjury.
It is not something to be taken lightly.
IRS Streamlined Domestic Offshore Submissions
While some lesser-experienced tax firms handle SDOP as part of their general tax practice, oftentimes they miss important nuances that are required for reporting accurately.
The problem is that many of these tax issues are very complex, and hiding in plain sight.
If the firm does not specialize in this area of law, they will miss the issues.
(SDOP) Streamlined Domestic Offshore Lawyers – Golding & Golding, Board-Certified Tax Law Specialist Team
Golding & Golding represents clients worldwide in over 70-countries exclusively in Streamlined, Offshore and IRS Voluntary Disclosure matters. We have successfully completed more than 1,000 streamlined and voluntary disclosure submissions.
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Common Mistakes in Streamlined Domestic Offshore Submissions (SDOP)
Here are 5 common issues to consider:
Foreign Pension is not Identical to a 401K
In the U.S., employer/employee contributions may escape taxation at the time of contribution — and they are taxed at a future date at the time of withdrawal. But, the IRS does not treat foreign pensions the same as U.S.
For example, in Singapore, a CPF is mandated and compulsory — but the IRS taxes both the contributions and growth within the fund.
Some Attorneys and CPAs are all too quick to just deem foreign retirement as ‘401K equivalent,’ and not report the income and/or account information with the streamlined domestic submission.
Understanding PFIC Reporting Exceptions
Not all PFIC situations are complex. While a foreign mutual fund with excess distributions can be an infinitely complicated analysis (especially when a single fund has dividends, capital gains, switch-outs and redemptions) — not all PFIC have excess distribution calculations. Moreover, if there are no excess distributions and the value is less than a certain value — the PFIC may even escape reporting.
PFIC Reporting Non-Exceptions
Some practitioners are all too quick to avoid reporting a PFIC because the value is below the threshold for reporting. BUT, even if the value is below reporting thresholds, if there was an excess distribution, then reporting is still required — even when the value of the PFIC is below reporting thresholds.
Disregarding a Per Se Corporation
You may believe that by disregarding the foreign entity, you can escape 5471 and/or 8865 reporting. While this may be true in some instances, the IRS publishes a list of per se corporations.
And, one of the most common types of foreign corporations (the Sociedad Anonima) is listed.
What does this mean?
It means you cannot disregard these specific types of entities.
Incorrectly Filing a Dormant 5471
And, with the IRS issuing more 5471 penalties than ever before in years past, it is important to not just assume an inactive or sleeping foreign corporation qualifies as dormant.
Interested in the Streamlined Domestic Offshore Procedures?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in Streamlined Domestic Offshore Procedures. Contact our firm today for assistance with getting compliant.
Sean holds a Master's in Tax Law from one of the top Tax LL.M. programs in the country at the University of Denver. He has also earned the prestigious IRS Enrolled Agent credential. Mr. Golding's articles have been referenced in such publications as the Washington Post, Forbes, Nolo, and various Law Journals nationwide.