Streamlined Domestic Offshore Procedures (SDOP) Services

What Are Streamlined Domestic Offshore Procedures?

Streamlined Domestic Offshore Procedures (SDOP) are simply an IRS program that lets eligible US residents fix past offshore tax compliance mistakes — and move forward by paying a tax amount, interest fee and one reduced penalty.

Under this track of the streamlined filing compliance procedures, it is possible to correct unreported income from foreign accounts and submit missing international forms — instead of facing a long list of separate penalty amounts. It should be noted that SDOP is meant only for people whose mistakes were not intentional.

Who can use SDOP to fix offshore tax compliance issues?

Taxpayers can leverage it if they are US residents who previously filed tax returns & had foreign financial assets or accounts and their reporting failures were “non-willful”.

In practice, streamlined domestic offshore procedures are a good fit in the below scenarios:

• You are a US citizen or green card holder or satisfy the substantial presence test
• You filed US income tax returns — for the last three years that were due
• You left out income from foreign bank or brokerage accounts or investment funds or similar assets
• You may have missed FBAR filings — FinCEN Form 114 — or information returns like Forms 8938, 3520, 5471 and 8621 or 926
• Your mistakes were due to negligence or oversight or a good-faith misunderstanding of the rules — not deliberate evasion
• The IRS has not already started a civil audit or criminal investigation on the returns

If there is any chance the conduct was willful, you may need a different path — like a formal voluntary disclosure through IRS Criminal Investigation and you should speak with a qualified taxation advisor.

What offshore accounts and assets are covered under SDOP?

Streamlined domestic offshore procedures focus on foreign financial accounts and specified foreign financial assets — that should have been reported — and/or generated income that was not reported for US tax purposes. Typical items within this context are presented below:

• Personal or joint foreign bank accounts
• Brokerage or investment platforms outside the US
• Interests in foreign corporations and partnerships or specific trusts
• Foreign retirement or pension accounts
• Units in foreign investment funds that trigger Form 8938 or other international reporting

Real estate abroad is, in general, not part of the penalty base — unless it is held through a foreign entity that itself is a reportable financial asset.

How do streamlined domestic offshore procedures work step by step?

Streamlined domestic offshore procedures work by having you correct recent years of returns and offshore accounts tax reporting — in one organized submission to the IRS. The usual sequence is presented below:

• Collecting records — gather foreign bank statements, investment reports and prior tax returns along with any letters from the IRS
• Reconstructing unreported income — identify interest, dividends and capital gains as well as other income that never made it onto the US returns
• Preparing amended returns — file amended federal income tax returns for the most recent three years that are past their original or extended due dates — adding all foreign income and necessary international forms
• Filing late FBARs — submit delinquent FBARs electronically through FinCEN for prior years where the foreign accounts crossed the filing threshold
• Completing Form 14654 — sign the IRS certification for SDOP — Form 14654 — explain why the conduct was non-willful and assess the necessary miscellaneous offshore penalty amount.
• Paying tax amount, interest fee and the penalty — include payment for additional tax and interest shown on the amended returns — plus the single streamlined domestic offshore procedures penalty figure
• Mailing the package — send the full packet to the IRS address shown in their instructions — so it is processed under this special procedure.

Once the packet is filed, the IRS reviews the submission. If everything matches streamlined domestic offshore procedures rules, many otherwise-applicable penalties are taken off the table

What penalties can SDOP reduce or replace?

streamlined domestic offshore procedures replace multiple potential offshore penalty payments with one miscellaneous charge — in parallel to the value of the foreign financial assets. A comparison is given in the table below:

All back tax and interest fees are still paid. The relief comes from limiting the extra charges that would otherwise compound year after year.

When might SDOP be the right choice for offshore tax compliance?

Streamlined domestic offshore procedures might be a good fit if you want to fix past offshore tax compliance issues — before the IRS contacts and you can honestly certify that the conduct was not intentional. Typical scenarios can be outlined as below:

• You recently learned about FBAR — and realized old accounts were never reported
• A foreign inheritance or gift left you with accounts you did not understand from a US tax perspective
• You used a foreign broker for years — but assumed foreign tax withheld there covered the US obligations
• The tax prior preparer did not ask about non-US accounts — and you only discovered the issue after reading IRS guidance

In each of the cases presented above, streamlined domestic offshore procedures can present a clearer path back into full compliance — with less risk than simply amending returns quietly on your own.

How can The Tax and Accounting Group support your submission?

The Tax and Accounting Group presents professional assistance to US taxpayers in Everett and across the country in evaluating the eligibility & preparing the full submission and restoring offshore tax compliance. Our dedicated SDOP services can be presented as below:

• A focused review of the foreign accounts and entities as well as prior US filings
• Expert guidance on whether SDOP or another route fits your distinct situation
• Detailed tax amount and penalty payment estimates before anything is filed
• Preparation of amended returns and FBARs along with the Form 14654 narrative
• Coordination with legal counsel when your facts call for it
• A professional plan for future offshore accounts tax reporting — so problems do not resurface

If you suspect you qualify for streamlined domestic offshore procedures, it is better to address the issue — before an IRS audit begins. Reach out to our team today to discuss your facts & options under this program.

FAQs

How is SDOP different from the foreign streamlined procedures?

It is for US residents. Yet, the foreign streamlined procedures apply to taxpayers who qualify as non-residents — during the covered years.

How many years of tax returns and FBARs are involved in SDOP?

Specific cases necessitate three years of amended tax returns and up to six years of FBARs linked with the offshore accounts.

Can SDOP be used if I inherited offshore accounts?

Yes, inherited or gifted foreign accounts can be included in streamlined domestic offshore procedures — if the non-compliance was non-willful.

Can I still use SDOP if I already amended some of my returns?

You may still satisfy the qualification — but a professional should review what was filed in order to see whether those years can be brought under one package.

What happens if the IRS rejects my streamlined domestic offshore submission?

In general, the case is managed under normal audit rules — which can mean standard FBAR and information-return penalties instead of streamlined domestic offshore procedures terms.

Do I need a tax professional for SDOP, or can I file on my own?

You can file on your own — However, taxpayers generally collaborate with professional tax and accounting firms, as the documentation and penalty calculations along with the narratives are highly technical.

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