If you qualify for the IRS Streamlined Filing Compliance Procedures, knowing how to navigate the process can help you catch up on your taxes while minimizing penalties. Whether you’re filing under the Streamlined Foreign Offshore Procedures (SFOP) or Streamlined Domestic Offshore Procedures (SDOP), following the right steps is crucial. Here’s a guide to get you through the process.

Step 1: Determine Your Eligibility

Before beginning, make sure you meet the criteria for either SFOP or SDOP. You must demonstrate non-wilfulness and ensure that you are not under IRS examination. Additionally, determine whether you qualify as a foreign resident (SFOP) or a domestic resident (SDOP).

Step 2: Gather Your Documentation

To complete the streamlined process, you’ll need:

• Three years of past tax returns (Forms 1040 and relevant schedules).
• Six years of FBARs (FinCEN Form 114) if your foreign financial accounts exceeded $10,000 at any point.
• Statements of non-wilfulness explaining why your failure to file was unintentional.
• Forms 14653 (SFOP) or 14654 (SDOP) for certification.

Step 3: Complete the Required Tax Forms

• Form 1040: Amend or file the past three years of returns.
• Consider attaching
  • Form 2555 for the Foreign Earned Income Exclusion (FEIE)
  • Form 1116 for the Foreign Tax Credit (FTC).
  • Schedule B: To report foreign accounts.
  • Schedule C: If you are self-employed.
  • Form 8938: If you meet the FATCA filing thresholds.
  • Potentially, other schedules or forms might be required.
• Form 14653 or 14654: Certify your non-wilfulness and provide a narrative explaining your circumstances.

Step 4: File Your FBARs

File FinCEN Form 114 electronically through the BSA E-Filing System, ensuring you elect to submit using the Streamlined Procedure. You need to include details for each foreign account, including:

• Account number and name of the financial institution.
• Maximum value during the reporting year.

Step 5: Submit Your Filing

• SFOP: Mail your documents to the designated IRS processing center. Clearly mark the top of your first page (and any other required Schedules or attached Forms) with “Streamlined Foreign Offshore”.
• SDOP: Use the appropriate IRS address for domestic streamlined submissions. Mark your submission (including the first page, required support Schedules, and attached Forms) as “Streamlined Domestic Offshore”.
• Electronic Filing: Some forms, like FBARs, must be filed online.

Step 6: Pay Any Tax and Interest Due

You must pay any tax owed plus interest at the time of filing. Use Form 1040-V to make payments via check or pay electronically using the IRS Direct Pay system.

Step 7: Monitor Your Submission

Once submitted, the IRS may take several months to process your streamlined application. Usually, no news it good news, so you shouldn’t expect to receive any correspondence from the IRS notifying you of their acceptance of your submissions.

Tips for a Successful Filing

• Consult a Tax Professional: Due to the complexity, professional guidance can help avoid errors.
• Keep Copies: Retain copies of all submitted documents and proof of filing.

Final Thoughts

The streamlined filing process can be very beneficial for expats and domestic taxpayers who want to catch up on their tax obligations without facing severe penalties. When in doubt, consult a tax advisor to guide you through the process and help craft your non-wilfulness statement.

The information in this blog post is for general informational purposes only and does not constitute professional tax advice. We strongly recommend consulting a qualified tax professional before making any decisions. US Expat Tax Advisor is not liable for any actions taken based on this content.

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