- 1 Streamlined Disclosure
- 2 You do not have to be a Citizen or Legal Permanent Resident
- 3 You can Include Domestic Income in a Streamlined Disclosure
- 4 There are Usually Very Complicated Tax Issues Lurking
- 5 SDOP 5% Penalty cannot be Waived or Negotiated
- 6 But Some SDOP Assets are Not Penalized
- 7 Meet our International Tax Law Specialist Team
Streamlined Disclosure: The IRS Streamlined Disclosure program may appear “relatively” uncomplicated at first, but a Streamlined submission is generally very detailed and comprehensive — with most of the complex tax issues hiding in plain sight.
Here are 5 very important facts about making a Streamlined Disclosure
You do not have to be a Citizen or Legal Permanent Resident
If you are a non-U.S. person, you may have been required to file tax returns in the U.S. due to qualifying under U.S. tax rules as a U.S. Person by way of the Substantial Presence Test. Let’s say you currently do not meet the Substantial Presence Test, but you met the test in any of the last 3-years, you can still file — and under Streamlined Foreign Offshore Procedures (SFOP), you may qualify for a penalty waiver.
You can Include Domestic Income in a Streamlined Disclosure
Let’s say you are amending the returns, or preparing original returns (SFOP Only) and you realize you missed a 1099 or other form of U.S. income. You can include this income on the returns submitted under the Streamlined Program, in addition to the foreign income.
There are Usually Very Complicated Tax Issues Lurking
Most streamlined disclosure submissions are way more complicated than meets the eye. And unfortunately, there is a new breed of tax lawyer scam in which the attorney baits you in with an artificially low up-front retainer, refers you out to a CPA under false pretenses using a “Kovel” Letter and then pulls a bait-and-switch on you for higher fees.
Common issues lurking beneath the surface, include:
SDOP 5% Penalty cannot be Waived or Negotiated
If you submit under the Streamlined Domestic Offshore Procedures, the 5% penalty cannot be waived or negotiated.
The penalty is firm, and if your intent is to try to side-step the penalty, you should consider making a Reasonable Cause submission in lieu of Streamlined.
But Some SDOP Assets are Not Penalized
For example, under most circumstances, the RRIF and RRSP are not penalized.
Also, foreign real estate (including rental property) owned by an individual (vs. corporate or partnership asset) will usually escape penalty as well.
In addition, if you believe you have a similar asset — such as foreign pensions — that should escape penalty, you may try to get that reduced, but submitting outside of the IRS approved guidelines may cause more headache than necessary.
Meet our International Tax Law Specialist Team
Our firm specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.