- 1 Streamlined Domestic Offshore Procedures
- 2 Streamlined Domestic Offshore for Unreported Foreign Accounts
- 3 Google Research for Streamlined Domestic Offshore for US Residents
- 4 Streamlined Domestic Offshore Procedures (SDOP) Explained
- 5 Streamlined Domestic Offshore Procedures are Still Available (For Now)
- 6 Who to Hire for Streamlined Offshore Disclosure Procedures Submissions
- 7 Golding & Golding: About Our International Tax Law Firm
Streamlined Domestic Offshore Procedures
Streamlined Procedures for US Residents: If you are US person such as US Citizen, Legal Permanent Resident, or Foreign National subject to US tax because you met the substantial presence test — you are required to report your worldwide income on your US tax return. You are also required to report your global assets, accounts, and investments on various international reporting forms, such as the FBAR and Form 8938. Understandably, most people are not aware of these requirements — because why would they be, right? The US is only one of two countries that follows a worldwide income/Citizen-Based Taxation (CBT) rule. Therefore, the chances are that whatever country you are originally from — if it is not the United States — follow Resident-Based Taxation (RBT) rules instead.
Let’s review the Streamlined Procedure for US Residents:
Streamlined Domestic Offshore for Unreported Foreign Accounts
For one reason or another, you only just learned that you should have been including your foreign income, accounts, assets, and investments on your US tax return. Maybe a few (or several) years have passed since you should have started reporting this information to the Internal Revenue Service.
What can you do now?
Google Research for Streamlined Domestic Offshore for US Residents
Much of the information you will find in your Google search will have no real world application to your situation.
- Yes, you may have been required to file the FBAR — and no you are not going to prison for an honest mistake.
- Yes, there may be willful penalties for some people who knowingly sought to evade reporting, but that is not you and that is not your situation.
Most likely, you will qualify for the Streamlined Procedures for US Residents which is the streamlined program designed for US residents (or more specifically, for non-foreign residents aka US or foreign residents who do not meet the strict rule of being a “Foreign Resident” for streamlined procedure purposes).
Then, in a few months you’ll Regain that Peace of Mind that Google snatched right out from underneath you.
Streamlined Domestic Offshore Procedures (SDOP) Explained
The streamlined domestic offshore procedures, are the procedures that Taxpayers use to get into compliance when they are non-willful, filed original tax returns “timely,” but simply missed or were unaware of certain foreign reporting requirements.
Here are the basics of what you need to know for the streamlined domestic program:
Filed Timely Tax Returns
In order to qualify for the streamlined program for US residents, you must have filed timely original tax returns. In our communications with the IRS over the past several years on the issue of “how timely,” the returns must have been filed — the Internal Revenue Services reviews it on a case-by-case basis.
For individuals who may have just missed the deadline for filing a tax return — for example if it was due in April and you filed it in May — then there may be some wiggle room (but it comes with inherent risks).
If it was due in April and you did not file an extension, and you filed the original tax returns in November or December chances are you will not qualify — but you should speak with a Board-Certified Tax Lawyer Specialist to assess your facts.
Three (3) Years of Tax Returns
In order to apply to the program you generally have to amend three years of previously filed tax returns to include the necessary information that you did not include first time around when you filed. It can also include domestic income as long as there is unreported foreign income.
Some people may prefer to only go back two years and then file in the current year, and do a simultaneous filing.
This is something else you may consider discussing with your tax attorney prior to submission but if you are going to only go back two years and then file the current year it is important to weigh the pros and cons.
When filing the tax returns, you will also include your international information reporting forms such as form 8938 as well.
File 6 Years of FBAR
FBAR is the FinCEN Form 114. It is used by US Persons to disclose foreign financial accounts that a person has ownership or co-ownership in — or signature authority over. The FBAR is important to get right due to the penalties associated with noncompliance. The FBAR penalties are typically the worst of the bunch out of all the international information reporting forms. Whether or not you filed original FBAR or not, you can submit either original or amended FBAR forms as part of the streamlined domestic offshore procedures.
Streamlined Domestic Offshore Non-Willful Certification & Penalty Calculations
The most important part of the streamline submission is getting the non-willful certification and penalty computation correct. The form requires the taxpayer to be non-willful , so it is important that if the taxpayer is willful — even if they only have a small amount of unreported income –that they do not file this form.
While a taxpayer does not require an attorney to represent them with the submission, it is always a benefit – but if it is not cost effective, then the taxpayer you should at least hire someone to review their statement.
Streamlined Domestic Offshore Procedures are Still Available (For Now)
When the standalone streamline program was introduced back in 2014, it was implemented as a band-aid to assist taxpayers with getting into compliance with prior year FBAR and FATCA reporting. The IRS has indicated that the program is temporary and will not go on forever. So, if you are considering submitting to the program you may consider submitting sooner as opposed to later. The IRS did close OVDP in September 2018 and recently modified the delinquency procedures in November of 2020 (essentially morphing it into a reasonable cause submission).
Who to Hire for Streamlined Offshore Disclosure Procedures Submissions
There are only a handful of Board-Certified tax law specialist attorneys, with 20+ years of experience and advanced credentials who specialize exclusively in international tax and offshore compliance. These types of firms charge a flat-fee, for both tax and legal, with the entire matter being handled in-house — to avoid issues with Kovel. Our firm in particular (Golding & Golding) developed a highly cost effective representation model which has been implemented by law firms across the country.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.