- 1 Streamlined Foreign Offshore Procedures
- 2 Purpose of the Streamlined Foreign Offshore Procedures
- 3 Who is Eligible for the Program?
- 4 Other Offshore Penalties you can Avoid
- 5 IRS Form 14653 Streamlined Foreign Non-Willful Certification
- 6 Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)
- 7 Need Help Finding an Experienced Offshore Tax Attorney?
- 8 Golding & Golding: About Our International Tax Law Firm
Streamlined Foreign Offshore Procedures
For non-willful Taxpayers who are considered ‘foreign residents’ and have not timely reported their foreign accounts, assets, investments, or income to the US Government in prior years, the Internal Revenue Service developed the Streamlined Foreign Offshore Procedures (SFOP) in order to allow Taxpayers to safely get into tax and international reporting compliance — and avoid all FBAR and FATCA penalties. The Streamlined Foreign Offshore Procedures (SFOP) is an IRS program designed for non-U.S. residents (foreign residents). Taxpayers may submit amended or original prior-year tax returns and international information returns such as the FBAR. Under the terms of the streamlined foreign program, taxpayers may disclose previously unreported offshore bank accounts, assets, income, and investments, without being penalized for past foreign account violations. All FBAR penalties, along with other foreign asset penalties are waived by the U.S. Government.
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
A summary of the program can be found in the recently updated Internal Revenue Manual (IRM) Section 21.8.2 et seq.
Why Submit to the Streamlined Foreign Program Now?
In recent years, the Internal Revenue Service has been aggressively enforcing foreign accounts compliance. To assist non-willful taxpayers, the IRS developed these programs. But, the programs will be ending soon.
Purpose of the Streamlined Foreign Offshore Procedures
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.
The tax and legal team at Golding & Golding have successfully handled thousands of streamlined filing submissions (Streamlined Domestic and Streamlined Foreign) for clients located all over the world.
Who is Eligible for the Program?
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 an 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.
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.
Willfulness does not mean intent.
There can be “lower” forms of willfulness, which do not require willful or intent — these additional willful standards 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.
In order to qualify as a “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.
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.
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:
IRS Form 14653 Streamlined Foreign Non-Willful Certification
In order to qualify for the Streamlined Domestic Program, you must be able to certify (under penalty of perjury) that you were non-willful on Form 14654.
Here are a few pointers:
You Cannot Be Even a Little Willful
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. You are signing the form under penalty of perjury. Your only option for formalized offshore disclosure is the traditional VDP.
Do Not Write a Novel
While the certification statement asks for significant facts to substantiate your non-willfulness, the goal is to be accurate and succinct. Even though each person’s facts and circumstances are different, most submissions do not require a 10-page summary.
Be Clear and Concise
The IRS agents are overworked and underpaid. If you could find a way to say the same sentence using seven (7) 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 as succinct (and concise) as possible — while still including all of the necessary information.
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 in your streamlined submission (and in life).
Review the IRS Form Instructions Before Submitting
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.
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.