If you primarily live outside the United States and recently discovered that you failed to report foreign income or foreign financial accounts, you may have a way to correct those mistakes. Some relief in this area can be important, as it can mean avoiding most of the steep penalties that the IRS can levy. The good news is that our dedicated offshore disclosure attorney can help.
The Streamlined Foreign Offshore Procedures (SFOP) allow certain eligible taxpayers living abroad to become compliant with U.S. tax laws for a reduced penalty as long as they can show their noncompliance wasn’t willful. With the help of a Bethesda streamlined foreign offshore procedures lawyer, you may be able to get the relief you need.
What Is Streamlined Foreign Offshore Procedures?
Streamlined Foreign Offshore Procedures provide eligible taxpayers who live outside the United States with a path towards IRS compliance after learning they failed to report foreign income or foreign financial accounts. The program allows qualifying taxpayers to correct those mistakes without facing many of the penalties that normally apply to offshore reporting violations.
To use the program, you generally must file delinquent or amended federal income tax returns for the previous three years, along with any required international information returns that were missing. You also must file delinquent FBAR for the previous six years if they were required.
One of the most important parts of the submission is the certification that your reporting failures resulted from non-willful conduct. Non-willful conduct generally means your mistakes resulted from negligence, inadvertence, a misunderstanding of the reporting requirements, or another good-faith error, rather than an intentional effort to avoid paying taxes or hiding assets.
Although the program can provide significant relief, every submission receives IRS review. Complete documentation and accurate explanations can dramatically improve your chances of success. You can rely on the guidance and counsel of a Streamlined Foreign Offshore Procedures attorney from our Bethesda office.
How Foreign and Domestic Streamline Procedures Differ
Although the SFOP and SDOP (Streamlined Domestic Offshore Procedures) share many similarities, there are some important differences you need to be aware of. A Bethesda attorney could answer your questions about the following regarding the Streamlined Foreign Offshore Procedures.
Residency Requirements
The most obvious difference involves where the taxpayer lives. The SFOP are designed for eligible taxpayers who satisfy the IRS’s non-residency requirements. The SDOP applies to taxpayers who reside in the United States and do not meet those foreign residency standards.
Offshore Penalties
One of the biggest advantages of the Foreign Offshore Procedures is that eligible taxpayers generally do not pay the miscellaneous offshore penalty that applies under the domestic program. Qualifying taxpayers still remain responsible for the taxes and interest they owe, but avoiding the offshore penalty can substantially reduce the overall financial impact.
Eligibility Standards
Both programs require taxpayers to certify that their reporting failures were non-willful. However, only the SFOP requires taxpayers to meet the IRS’s non-residency test. Choosing the wrong program can result in delays or rejection of the submission.
Required Filings
The filing requirements are largely the same under both programs. Each generally requires three years of amended or delinquent federal income tax returns, six years of FBARs when required, and any missing international information returns. Both programs also require a detailed non-willful certification explaining why the reporting failures occurred.
Talk to a Bethesda Attorney About Applying for the Streamlined Foreign Offshore Procedures Today
You have multiple IRS reporting obligations when you have financial holdings overseas. If you believe you’ve failed to file a foreign tax return or report an overseas account on time, our tax attorney can explain how it may not be too late to avoid steep IRS penalties. Reach out to a Bethesda Streamlined Foreign Offshore Procedures lawyer today to learn more.