Streamlined Foreign Offshore Procedures (SFOP)
Streamlined Foreign Offshore Procedures ("SFOP"): what is it and how can you catch up on your expat taxes?
Are you a US expat or an accidental American who just found out that all those years you worked and lived abroad, you had to file your U.S. tax returns? No worries, we’ll help you get caught up with your U.S. expat taxes stress-free!
This article will outline exactly how you can catch up under a special IRS amnesty program called the Streamlined Foreign Offshore Procedures ("SFOP") without spending thousands of dollars. Let’s get started!
What are the Streamlined Foreign Offshore Procedures?
The IRS has a special amnesty program called the Streamlined Foreign Offshore Procedure ("SFOP") specifically for expats and accidental Americans who need to catch up on their U.S. taxes and other reporting obligations.
The SFOP is only available to non-U.S. resident taxpayers whose non-compliance has been determined to be non-willful. This will be described in more detail below.
If you are eligible to use the SFOP, you will not be subject to failure-to file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties. Even when your returns as part of your SFOP are selected for audit by the IRS, you will not be subject to these penalties, unless the IRS proves your non-compliance and FBAR violation was willful.
What do I need to file under the SFOP?
Your last 3 delinquent returns
Under the amnesty program, you must file tax returns for the last 3 years that are yet due. If a tax return is not yet due - for example, for tax year 2021 - it cannot be part of your SFOP. If 2021 tax year is not yet due, the 2020-2018 tax returns will be part of your SFOP.
Your last 6 delinquent forms 114 (FBAR)
In addition to your tax returns, you should also file Form 114 FinCen (FBAR) for the last 6 years. Note that under the SFOP, you must even file Form 114 for years in which you did not even meet the $10,000 threshold. For more information on the FBAR, check out this article.
Finally, you should certify that you did not willfully violate the regulations. You must provide this certification on Form 14653.
Am I eligible to file under the Streamlined Foreign Offshore Procedures?
There are 2 strict conditions to be eligible for this procedure. These are defined as follows:
This requirement means that the taxpayer must be considered a “foreign resident". U.S. expats and accidental Americans must meet the 330-day rule to be considered a "foreign resident":
"Individual U.S. citizens meet the non-residency requirement if they have not been a resident of the U.S. and have been physically present outside the U.S. for at least 330 full days in one or more of the last 3 years for which the due date of the U.S. tax return (or the properly requested extended due date) has passed."
In other words, you meet this requirement if you have not been a resident of the U.S. for the past 3 years and have physically lived outside the U.S. for at least 330 days per year.
If you file jointly, both spouses must meet the non-residency requirement individually.
To be eligible for the SFOP, you must be found to have engaged in non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of good faith misunderstanding of the requirements of the law.
For example, you honestly did not know that you were required to file a tax return in the United States.
If you don’t fulfil these 2 conditions, you are not allowed to file under the SFOP.
How can you file under the SFOP with Expatfile?
Expatfile offers an affordable way to prepare your SFOP by yourself and cut out the middlemen. Here are the exact instructions to complete your SFOP with Expatfile's expat-friendly tax software:
- Log in to our software and individually prepare your 2018, 2019, and 2020 returns. Please start with 2018 and work your way up so that our software can makes the best recommendations for you. Our software has a feature where you can import data from prior year returns into the return you are preparing. So, preparing your SFOP document set will be quick!
- Complete Form 14653. In this form you need to certify your noncompliance was non-willful. Once completed, print this form 3 times. If you don’t submit this form or it is incomplete, be aware your returns will be processed in the normal course without the benefits of the SFOP. You can also ask our customer support to prepare this form for you free of charge.
- Print out all 3 returns and include "Streamlined Foreign Offshore" at the top of each return (so only the first page of 1040), written in red ink. This is critical to make sure your returns are processed through these special procedures.
- Use a form 14653 as a cover for each return.
- Sign each return and each form 14653. Your tax returns are now completed and in line with IRS requirements.
- Let's e-file your FBARs for the last 6 years. This will be easy as it is the same form for all years. Just log in at the BSA E-filing website to e-file your FBARs. If you leave your e-mail here, we’ll send you simple FBAR instructions to make it even more simple.
Important to note that when completing your FBARs, select "Other” as the reason for filing late. Once the explanation box appears, enter “Streamlined Compliance Procedures."
- Once the above steps are complete, mail your returns in 1 envelop to the below IRS address. You should not attach the FBARs to your SFOP document set.
Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741
We hope the above instructions will help you get started with your streamlined filing procedure. Simply complete out your SFOP document set yourself using Expatfile instead of spending thousands of dollars on tax consultants. Most expats prepare their Streamlined Foreign Offshore Procedure document set with Expatfile for a total of $297 (3x Standard package). Reference is made to our pricing here.
If you still have questions, please contact our customer support. We welcome any questions you may have.