Frequently Asked Streamlined Offshore Questions (2024 Primer)

A Primer on Streamlined Offshore Procedure Submissions

FAQs for the Streamlined Offshore Procedure Submissions

At Golding & Golding, our international tax law specialist team focuses exclusively on international tax. We have helped thousands of taxpayers across the globe in over 80 countries by preparing streamlined offshore tax and legal submissions to the IRS. Technically, the program is referred to as the Streamlined Filing Compliance Procedures (SFCP) and it offers two versions of the program — Streamlined Domestic Offshore Procedures (SDOP for U.S. Residents) and Streamlined Foreign Offshore Procedures (SFOP, Non-U.S. Residents). Over the past ten years that the program has been in existence, our team has written hundreds of articles on all aspects of streamlined procedures, the different international reporting requirements, and how to qualify as non-willful. To aid Taxpayers in understanding different aspects of offshore disclosure We have authored several primers as well on matters involving International Tax, Offshore Disclosure, Foreign Trusts, FBAR, etc. In continuing our annual international tax primers, we will focus on taxpayers considering the streamlined procedures. 

What is the Streamlined Program?

The streamlined program is a program developed by the Internal Revenue Service that provides an opportunity to non-willful taxpayers across the globe, including the United States who are non-willful and out of U.S. tax compliance for foreign accounts, assets, investments, and income.

Who is Qualified to Submit to the Streamlined Procedures?

Taxpayers who are non-willful may qualify for the streamlined procedures. For Taxpayers who qualify for the domestic version of the program, they may only amend previously filed tax returns, whereas taxpayers who qualify for the foreign version of the program can file original returns as part of their submission.

How to Know if I am Non-Willful?

The non-willful requirement is the most important aspect of making a streamlined submission. Taxpayers should work with a Board-Certified Tax Law Specialist to evaluate the totality of the facts and circumstances involving their noncompliance in order to make a determination by providing the IRS a succinct summary of the noncompliance.

What if I Previously Amended Returns Outside of SFCP?

If a taxpayer previously amended returns outside of the streamlined procedures, they may typically have the opportunity to submit to the streamlined procedures, but they do have to pay the penalty if it is a domestic submission (SDOP). For reference, the streamlined domestic offshore procedures carry with them a 5% Title 26 Miscellaneous Offshore Penalty whereas the streamlined foreign offshore procedures provide for a penalty waiver.

Can I Apply the Foreign Earned Income Exclusion (FEIE)?

Yes, taxpayers who are submitting tax returns under the program can apply Form 2555, foreign earned income exclusion to their earned income (and house) if they qualify.

Can I Apply for Foreign Tax Credits (FTC) in SFCP?

Likewise, if a taxpayer already paid certain foreign taxes, they may be able to apply Form 1116 for foreign tax credits.

Can I Make a 1040-NR Treaty Election?

Some taxpayers may benefit from making a treaty election to be treated as foreign persons for tax purposes. This typically would not be done under the streamlined procedures since it requires the filing of a Form 1040 and not Form 1040-NR with a Form 8833 treaty election.

When do I Pay the Streamlined Penalty Under SDOP?

For taxpayers who are subject to the streamlined procedures penalty, the penalty is paid at the time of this submission. The streamlined procedures are essentially a ‘one and done’ submission wherein the taxpayer submits amended or original returns, amended or original FBAR, International Reporting Forms, the 14654/14653 Streamlined Certification, and any payments that are due.

Will I Receive a Closing Letter?

No, taxpayers do not receive a closing letter as part of the streamlined procedures. But, as part of the Streamlined Domestic Offshore Procedures, the taxpayer will receive an acknowledgment letter that the penalty and taxes have been received and applied.

What if I Want to Dispute the Penalty Later?

By submitting to the Streamlined Procedures, the taxpayer is waiving the opportunity to try to dispute the penalty at a later time. This is written directly into the language of the certification form.

Can the IRS Still Audit Me?

Yes, the IRS still has the opportunity to audit a taxpayer at the time they make a streamlined submission and while the statutory period for audit remains open. Therefore, taxpayers should be sure that they have retained an experienced specialist who offers post-submission representation in case of an IRS tax audit.

Which Types of Law Firms Handle SFCP?

Unfortunately, many inexperienced and general tax lawyers who purport to be experts try their hand at the streamlined procedures and oftentimes make serious mistakes that can negatively impact the taxpayer’s submission. This is why taxpayers who are considering a streamlined submission should stick to law firms that have Board-Certified Tax Law Specialists (who specialize in International Tax Law) handling your matter. We have additional articles you can reference on common mistakes that taxpayers make,  along with the more serious streamlined submission mistakes to avoid.

What if I made a Small Mistake with my SFCP?

Small mistakes can be resolved relatively easily and in fact, the IRS has a procedure in place to assist taxpayers who may have made a mistake or two.

What if I missed an Account or Asset in the Penalty Certification Form?

If a taxpayer missed an account, technically they are supposed to go back and amend the streamlined submission. It becomes more important in a situation in which an account may have been missed that would have impacted the Streamlined Title 26 Miscellaneous Offshore Penalty.

The Streamlined Procedures are Only One IRS Offshore Option

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.