What is a Streamlined Foreign Offshore Procedure?
The Streamlined Foreign Offshore Procedures (SFOP) is a method implemented by the IRS for foreign tax residents which allows them to be brought into offshore compliance. By doing this, the taxpayer can submit amended or original tax returns for prior years; and international information returns such as the FBAR.
Following the SFOP means taxpayers can disclose previously unreported offshore bank accounts, assets, income, and investments without being penalised for past foreign account violations that they may hold. In this case, all FBAR penalties, along with other foreign asset penalties will be waived by the U.S. Government.
Eligibility for the Program
A U.S person must meet 3 main requirements to apply for the Streamlined Foreign Offshore Procedure:
- They must be non-wilful
- They must qualify as a “Foreign Resident”
- They should not be under audit
- 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.
- Foreign Resident
- 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; 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.
- Under Audit or Examination?
- If the IRS has instigated 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. (IRS)
- A taxpayer under criminal investigation by IRS Criminal Investigation is also ineligible to use the streamlined procedures. (IRS)
It would be advisable to fulfil the SFOP if needed as the IRS have recently implemented a more aggressive approach to foreign residents with a U.S. status who have unreported offshore bank accounts, assets, income and investments by enforcing larger penalties.
Following Streamlined Foreign Offshore Procedures allows for all penalties to be avoided.
If you would like to discuss this further, please contact us.