The Streamlined Filing Compliance Procedures (SFCP) consist of two distinct programs designed by the IRS to help U.S. taxpayers voluntarily correct past non-compliance with offshore reporting requirements: the Streamlined Domestic Offshore Procedures (SDOP) and the Streamlined Foreign Offshore Procedures (SFOP). While both programs aim to facilitate compliance and reduce penalties for eligible taxpayers, they cater to different categories of taxpayers based on their residency status and offer different terms.
Here's a breakdown of the key differences between SDOP and SFOP:
1. The Streamlined Foreign Offshore Procedures (SFOP) - For U.S. taxpayers residing outside the United States
- You must meet the non-residency requirement, which generally means that you have lived outside the United States for at least 330 days during one of the last three years.
- Non-Willful Conduct: Your failure to report all income, pay all tax, and submit all required information returns, including FBARs (Report of Foreign Bank and Financial Accounts), must have been non-willful. This means that your actions were unintentional or due to negligence, rather than intentional disregard of the law. You need to attach Form 14653 to your returns to certify your non-willful conduct.
- Tax Compliance: You must have failed to report income from foreign financial assets and pay tax on that income, and may also have failed to file an FBAR with respect to these assets, and such failures resulted from non-willful conduct.
- A taxpayer who is eligible to use this program and who complies with all of the instructions will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.
2. Streamlined Domestic Offshore Procedures (SDOP) - For U.S. Taxpayers Residing in the United States
- Fail to meet the applicable non-residency requirement under SFOP
- You have previously filed a U.S. tax return (if required) for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed.
- Non-Willful Conduct: Your failure to report all income, pay all tax, and submit all required information returns, including FBARs, must have been non-willful. You need to attach Form 14654 to your returns to certify your non-willful conduct.
- You have failed to report gross income from a foreign financial asset and pay tax as required by U.S. law, and may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) and/or one or more international information returns (e.g., Forms 3520, 3520-A, 5471, 5472, 8938, 926, and 8621) with respect to the foreign financial asset.
- You are subject to a miscellaneous offshore penalty, which is equal to 5 percent of the highest aggregate balance/value of the taxpayer’s foreign financial assets that are subject to the miscellaneous offshore penalty during the years in the covered tax return period and the covered FBAR period.
Learn more about Streamlined Filing Compliance Procedures here: Streamlined Filing Compliance Procedures