If you’re a U.S. taxpayer residing outside the United States, you might be eligible for the IRS streamlined foreign offshore procedure (SFOP). Under certain specific circumstances, this program might streamline the process of making up for failure to pay taxes while you were living abroad. Learn more about the SFOP, and find out whether you’re eligible.
Fully complying with the eligibility requirements for the streamlined domestic offshore procedures can be challenging. To get started, you’ll need to learn more about this program and how it’s designed to help U.S. expatriates make up for failing to pay their taxes.
The SFOP is a program designed to help U.S. citizens or other persons living abroad who fall under U.S. tax law with a speedy way to make up for failure to pay previously owed taxes. Since the OVDP program ended in 2018, the SFOP program is now the default option for U.S. residents overseas and other applicable parties (assuming the behavior is non-willful). To be eligible for the SFOP, you’ll need to prove you’ve spent most of your time abroad and that you didn’t willfully intend to fail to report your foreign bank accounts or assets and pay your taxes.
In the absence of the SFOP, individuals governed by U.S. tax law would have to go through complex, lengthy procedures to get back in the good graces of the IRS. This program is designed to help U.S. taxpayers who didn’t intend to violate the law come back into compliance rapidly and without having to tackle any unreasonable hurdles.
To be compliant with the requirements of the SFOP, you’ll need to meet some basic criteria:
Let’s break that all down. The SFOP most commonly applies to people who have U.S. citizenship or legal immigration status and spend most of their time overseas. To meet the criteria of the SFOP, you must comply with the non-residency requirements imposed by the IRS. Specifically, you must have spent 330 or more days overseas during each year for which you wish to take advantage of the SFOP program.
Additionally, the SFOP program is also available to non-residents or non-citizens who spent a significant amount of time in the U.S. during a particular year for occupational or other reasons. Whatever your citizenship or residency status may be, you’re eligible to take part in the SFOP program if you made foreign income that you didn’t report to the IRS. However, you can only take advantage of this program if you didn’t mean to fail to file your taxes.
To begin the SFOP process, the IRS indicates that you’ll need to submit tax returns for the last three years “for which the U.S. tax return due date (or properly applied for extended due date) has passed.” If you didn’t file tax returns at all for any of these years, you’ll need to submit a Form 1040 for each year along with any other required return documentation.
If you filed taxes for any of the three years but you filed incorrectly, you’ll need to submit a Form 1040X for each year. Whichever forms you submit, make sure to handwrite “Streamlined Foreign Offshore” on the top of each document to make sure your filings will be handled properly.
Additionally, you’ll need to submit a Form 14653, which certifies that you’re eligible for the SFOP program. This form is your best tool for proving that your failure to pay was non-willful, so sitting down with a qualified lawyer to take care of this critical piece of paperwork will help you craft a persuasive case.
It will also, of course, be necessary to make any delinquent tax payments, and if you don’t have an SSN or an ITIN, you’ll need to apply for one of these U.S. identifying numbers before proceeding. For more information on the documentation you’ll need to provide, visit the IRS’ official SFOP page.
Proving that your failure to file was non-willful is complicated. In addition to proving that you didn’t know about the applicable tax laws, you must also demonstrate that you didn’t have adequate opportunity to learn about these requirements. Even if you didn’t know about the U.S. tax laws that applied to your situation, you may be ineligible for the SFOP program if you had a reasonable chance to become educated on relevant tax laws.
This is a complicated question, but in general, you only need to file if you made enough money to meet the filing thresholds. Also, you need to file an FBAR form or another applicable document if you have had more than $10,000 in your foreign bank accounts at any point during the year. Essentially, the IRS wants to make sure that all U.S. citizens or legal residents remain under the purview of U.S. tax law and that any income made by said individuals is taxed appropriately even when they’re residing overseas.
While your employer certainly should let you know about any applicable tax laws that might get you in trouble with the IRS, it’s your responsibility to learn about relevant tax laws if you want to retain your IRS compliance.
Answer this brief questionnaire to determine whether you’re eligible for the SFOP program:
Even though the SFOP is designed to “streamline” the process of getting back in the good graces of the IRS, finding out whether you qualify for this program is anything but simple. If you aren’t careful, you could accidentally try to take advantage of the SFOP even when your evasion of U.S. tax law can clearly be demonstrated as being willful. By then, it will be too late, so it’s best to cover all the details before you get started with the SFOP process.
As a former IRS trial attorney, Vic Abajian is the most qualified attorney in Los Angeles for handling your SFOP claim. From working with you to perfect your FBAR disclosures to helping you understand whether your failure to comply was willful or non-willful, Abajian Law is standing by to get you back up to speed with the IRS as fast as possible while skipping all the confusion and guesswork.