Streamlined Foreign Offshore Procedures 2019-2020: Am I Eligible?
Read this to know whether you are eligible or not!
Discovering that you have a US tax obligation on assets or financial accounts held abroad is surprising. But once you understand this responsibility, there are many programs that you can use to become compliant. If you meet the requirements, then you can file under the Streamlined Foreign Offshore Procedures (SFOP)
As a US taxpayer, you have to fulfill your tax filing obligations, whether you are in the country or live abroad. SFOP are government programs designed by the Internal Revenue Service (IRS) to allow citizens living in foreign countries to pay taxes. The program aims at bringing the taxpayers with undisclosed investments, income, accounts or assets into IRS Offshore Compliance without any penalties.
If you stay outside the US but are still a citizen, then you must be wondering if you are eligible and what the programs involve. In this guide, we provide you with everything you need to know about SFOP 2019-2020 to ensure that you stay on the right side of the law.
Eligibility Criteria for Streamlined Foreign Offshore Procedures
The IRS started SFOP in 2014 as an alternative to the Offshore Voluntary Disclosure Program (OVDP). It was a traditional internal revenue service program created to bring businesses, estates, and individuals into Offshore Foreign Compliance.
To qualify for the Streamlined Foreign Offshore Procedures, the IRS has some guidelines that an individual should meet. These requirements are:
- The negligence must be non-willful
- Must qualify as a non-resident
Willful tax evasion happens when a citizen fails to fulfill his/her tax obligations when they were aware of the requirement. On the contrary, non-willful tax valuations occur when a US citizen fails to pay taxes when you were not aware of the obligation. If the IRS finds the violation to be non-willful, you get tax waivers or no penalties.
However, you will need to provide a statement of facts to the IRS with an explanation of why you failed to file the tax to use the procedures. The conduct must be non-willful.
IRS defines non-willful conduct as conduct due to mistakes, inadvertence, negligence or conduct resulting from a misunderstanding of the law. There is no definite meaning of the term, considering that many factors can influence the behavior.
Each person has his/her reasons why they did not report. So, before you make any decisions on which program you should enter, speaking to an attorney is advisable. But you must not have acted with intentional omission, intentional misinterpretation or reckless disregard.
The Streamlined Foreign Offshore Procedures requirements depend on whether a person is a non-US person or a US person.
The IRS considers a taxpayer to be a non-resident if the person was not living in the United States in the last 330 full days, and he/she did not have a US abode. If you meet the non-residency test, then you can join SFOP.
Streamlined Foreign Offshore Submission Instructions
There are specific submission requirements that taxpayers must follow to enjoy the benefits of Streamlined Foreign Offshore Procedures. If you fail to submit these essential items, then processing your returns will happen in the normal process.
- Tax Returns: Tax Returns requirements state that a person must file amended or original tax returns for the last three years reporting all essential offshore investments, accounts, income or assets.
- FBAR: The taxpayer must file Foreign Bank Account Reports for six years, including all required Life Insurance policies, pensions, investment accounts, bank accounts and more.
- Informational Returns: The taxpayer must file all needed informational returns such as Forms 8865, 8621, 5472, 5471, 3520-A, 3520, etc. These forms are fundamental, and failure to include any of them can lead to penalties and fines.
- Certification Form 14653: In this form, the person must state all the facts relevant to establishing non-willfulness under penalty of perjury. It’s the main document that the government needs.
Although the certification statement demands several facts to prove your non-willfulness, you need to be brief and accurate. Even though each person’s reasons are unique, typically no circumstance requires a 10-page explanation.
What You Should Know About the Submission
- The IRS can alter the terms and can apply a penalty
- The IRS can end or terminate the program anytime
- Persons under examinations or audits even if not related to International Tax don’t qualify.
Don’t Meet All the Requirements For SFOP?
Not meeting the requirements of the IRS isn’t a reason not to apply for SFOP. Besides, there is no loss in applying for the program. Although you won’t get a waiver if IRS rejects your application, the Statute of limitations can protect you. If IRS determines that what you stated on the Certification Letter is satisfactory to show non-voluntary tax avoidance, then you can qualify for the waiver of penalties.
If you have factors that can limit your chances of approval into the program, then you should consider advice from a tax attorney. Attorneys are experts in the field, and they know the right steps that you should take to avoid getting in trouble.
SFOP allows Americans outside the US to file original and overdue tax returns to avoid penalties. The streamlined filing compliance procedures are available to people certifying that their failure to observe tax obligations by paying all taxes due and report foreign financial assets was non-willful. The program enables many people to come into compliance with the tax requirements without worrying about penalties.