- 1 Streamlined Foreign Offshore Procedures
- 2 Purpose of the Streamlined Program for Non-U.S. Residents
- 3 IRS Form 14653 Non-Willful Certification
- 4 First Try Streamlined, then go OVDP?
- 5 Are Streamlined Foreign Procedures Ending in 2019 or 2020?
- 6 Don’t Be Misled by Inexperienced Streamlined Counsel
- 7 Golding & Golding Recent Streamlined Case Highlights
- 8 Interested in Learning More?
Streamlined Foreign Offshore Procedures: The Streamlined Foreign Offshore Procedures (SFOP) is an IRS program for foreign residents. In recent years, the Internal Revenue Service has been aggressively enforcing foreign accounts compliance. To assist non-willful taxpayers, the IRS also developed two (2) different Streamlined Filing Compliance Procedures. The purpose of the foreign offshore program is to bring non-residents into offshore compliance, and avoid all FATCA and FBAR penalties. Under the terms of the program, taxpayers may disclose previously unreported offshore bank accounts, assets, income and investments, without being penalized for past foreign account violations.
We will summarize how to qualify for SFOP — and how to apply to the program.
Streamlined Foreign Offshore Procedures
To apply for the Streamlined Foreign Offshore Procedures, a U.S person must meet (3) main requirements:
- Qualify as a “Foreign Resident”
- Not be under audit
Unlike its domestic counterpart, the foreign streamlined program results in no Title 26 miscellaneous offshore penalty for the taxpayer. In addition, the applicant can submit original tax returns to the IRS.
At Golding & Golding our International tax attorneys specialize exclusively in the IRS FATCA and FBAR Streamlined Program and Voluntary Disclosure procedures, and each case is led by a Board-Certified Tax Law Specialist.
IRM 184.108.40.206.1 (Internal Revenue Manual)
A summary of the program can be found in the recently updated Internal Revenue Manual (IRM) Section 21.8.2 et seq.
Purpose of the Streamlined Program for Non-U.S. Residents
The purpose of the Streamlined Foreign Program is to allow foreign residents with U.S. tax status to avoid all penalties by filing now, and avoid being assessed with a potentially larger penalty later — noting that in recent years, the IRS has become much more aggressive in enforcing FBAR and offshore penalties.
By submitting to Streamlined Foreign Offshore Procedures, applicants can avoid all penalties.
Eligibility Criteria for the Streamlined Foreign Offshore
The Streamlined Foreign Offshore Procedures were introduced in 2014 as an alternative to OVDP. The requirements are less onerous than under traditional OVDP or VDP — and is efficient and cost-effective method to quickly get into FBAR & FATCA compliance
In order to be eligible for the streamlined foreign offshore procedures there are three (3) main elements. Within these elements there’re various requirements, nuances, exclusions, exceptions and limitations — but these are the three main components.
A. Were You Non-Willful?
Generally, if a person was unaware that there was a foreign account, foreign income, or foreign asset reporting requirement, the applicant may qualify as non-willful.
Unfortunately, there is no bright-line test, and a more complex “totality of the circumstances” analysis is required.
Non-Willful vs. Lower Standards of Willfulness
Willfulness does not mean intent.
There can be “lower” forms of willfulness, which do not require willful or intent — these additional willful standard are referred to as:
Even if a person was only non-willful for a small amount of time, or was willful but only had relatively small amounts of unreported income they do not qualify.
Learn what happens if you are willful and try to enter Streamlined Foreign Offshore Procedures.
B. Are You a Foreign Resident?
In order to qualify as “Foreign Resident,” you must be either a:
- U.S. Citizen or Legal Permanent Resident (Green Card Holder) and reside outside of the United States for at least 330 days in any one of the last three (3); or
- Not qualify as a U.S. Citizen or Legal Permanent Resident, and not meet the Substantial Presence Test in at least one of the last three (3) tax years) you may obtain a waiver of all FBAR and FATCA penalties.
IRC 911 (Physical Presence Test vs. Bona-Fide Resident Test)
The Streamlined Foreign “330-day rule,” is a hard and fast rule.
Thus, the Streamlined Foreign “330-day rule” should be distinguished from Internal Revenue Code section 911 which is used by taxpayers trying to claim the Foreign Earned Income Exclusion by showing they qualify for either the physical presence test (330 days in any 12-month period) or the bona fide residence test.
Thus, even though a person could qualify as a bona fide resident under IRC 911 for the foreign earned income exclusion, it does not mean that they qualify for the streamlined foreign program.
C. Are You Currently Under Audit or Examination
As provided by the IRS:
If the IRS has initiated a civil examination of taxpayer’s returns for any taxable year, regardless of whether the examination relates to undisclosed foreign financial assets, the taxpayer will not be eligible to use the streamlined procedures.
Taxpayers under examination may consult with their agent. Similarly, a taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures.
Other Offshore Penalties you can Avoid
By submitting the 5% penalty, you can avoid other penalties, including:
- FBAR Penalties
- 3520 Penalties
- 3520-A Penalties
- Form 5471 Penalties
- Form 5472 Penalties
- Form 8621 Penalties
- Form 8938 Penalties
- Form 8865 Penalties
IRS Form 14653 Non-Willful Certification
The Streamlined Foreign Offshore Disclosure requires the applicant to complete a Form 14653.
Here are some quick tips
Non-Willful Across the Board
If you are willful, you do not qualify for the streamlined program. Even if you are willful but sorry and regretful, in the eyes of the IRS — you are still willful. Your only option for formalized offshore disclosure is the traditional VDP.
The Certification form is not a Thesis Statement
While the certification statement asks for significant facts to substantiate your non-willfulness, the goal is to be accurate and succinct.
Each person’s facts and circumstances are different, but typically no circumstance requires a 10-page summary.
Do Not Overwrite the Submission
The IRS agents are overworked and underpaid. If you could find a way to say the same sentence using seven words instead of 15 words, then you should do it. You should do your best to write and rewrite the statement as many times as necessary to get it to its most concise point – while still including all of the necessary information.
Contain Any Resentment you have for the IRS
The IRS agents are only doing their job; it is not as if the agents have it out for you. Whether you want to believe that or not, we’ve been doing this for many years, and we can tell you most agents are not gunning to become the head IRS person in charge.
They have a job and they have certain protocols for accepting or rejecting a submission. There is no need to be rude to the agents; be respectful and you will find that being respectful will go a long way.
Double-and Triple-Check the Application Before Submission
The IRS periodically updates the program requirements, and updates the version of the forms. It is important that you have met all the necessary requirements, both substantively and administratively — so that your submission does not get kick-backed unnecessarily.
First Try Streamlined, then go OVDP?
You’re thinking smart, but the IRS is already ahead of you.
Why? Because if you could dip your toe in the Streamlined Pool first, before taking the plunge into OVDP, then everyone would do it.
As provided by the IRS:
Once a taxpayer makes a submission under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, the taxpayer may not participate in OVDP.
Similarly, a taxpayer who submits to an OVDP voluntary disclosure letter pursuant to OVDP FAQ 24 on or after July 1, 2014, is not eligible to participate in the streamlined procedures.
Are Streamlined Foreign Procedures Ending in 2019 or 2020?
There is no knowing if the Streamlined Foreign Offshore Procedures Ending date is coming now, or later. BUT, the IRS reserves the right to end the program at any time and has indicated that the program “won’t last forever.”
Don’t Be Misled by Inexperienced Streamlined Counsel
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.
Beware of attorneys trying to mislead you about the streamlined program.
- Learn more about the Board-Certified Tax Lawyer Specialist credential
- Learn more about the IRS Enrolled Agent credential
- Learn More about Golding & Golding’s Case Accomplishments
- Learn More about Golding & Golding Testimonials from prior clients
Golding & Golding Recent Streamlined Case Highlights
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants and Financial Professionals worldwide.
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
Interested in Learning More?
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.