For US citizens and Green Card holders living abroad who have unintentionally fallen behind on their US tax obligations, the IRS Streamlined Foreign Offshore Procedures (SFOP) offer an incredibly valuable path to compliance. Unlike its domestic counterpart, the SFOP comes with a key advantage: penalty relief. Here’s why the SFOP is considered a lifeline for expats seeking to get back on track.
What Is the SFOP?
The Streamlined Foreign Offshore Procedures are designed for non-resident US taxpayers who have failed to file their US tax returns and/or required international information forms (like FBARs), but whose non-compliance was non-willful.
If eligible, taxpayers can file the necessary documents and pay any taxes owed without facing penalties typically associated with offshore reporting failures.
The Key Benefit: No Penalties
Perhaps the most compelling feature of the SFOP is that it waives all failure-to-file, failure-to-pay, accuracy-related, and FBAR penalties. This is in stark contrast to the SDOP (Streamlined Domestic Offshore Procedures), which imposes a 5% miscellaneous offshore penalty.
This relief can result in significant savings, particularly for individuals with multiple foreign accounts or assets that might otherwise trigger steep penalties.
Eligibility for SFOP
To qualify for the SFOP, you must:
- Meet the non-residency requirement:
- Be physically outside the United States for at least 330 full days in one of the past three tax years.
- Certify that your failure to comply was non-wilful.
- Not be under current IRS audit or investigation.
- Have a valid Taxpayer Identification Number, typically a Social Security Number (SSN).
Opportunity to File Original Returns
Another major advantage of the SFOP is that it allows you to file original tax returns, not just amended ones. This is particularly useful for expats who:
- Were unaware of their ongoing US tax filing obligations,
- Never filed a US tax return before, and
- Need to bring themselves into compliance for the first time.
This differs from SDOP, which typically requires amended returns, meaning the taxpayer had already filed but with incomplete or incorrect information.
What You’ll Need to File
Under the SFOP, you’ll be required to:
- File three years of original or amended tax returns,
- Include any relevant forms such as Form 2555 (Foreign Earned Income Exclusion) or Form 1116 (Foreign Tax Credit),
- Submit six years of FBARs (FinCEN Form 114),
- Complete Form 14653, certifying non-willfulness and eligibility for the SFOP,
- Pay any tax and interest owed, but no penalties.
Final Thoughts
For expats who qualify, the Streamlined Foreign Offshore Procedures offer a generous and clear route to compliance. The waiver of penalties, combined with the ability to file original returns, makes the SFOP particularly appealing for those who are newly aware of their US tax obligations.
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.
If you would like more information or want to schedule a one-on-one consultancy call, please get in touch using our contact form.
