Streamlined filing compliance procedures – is the option to minimize your penalties and interests when you have unfiled taxes

personal income tax
  • by admin
  • January 17, 2021

What are Streamlined filing compliance procedures? Who can file Streamlined filing compliance procedures? In this post, we are going to discuss the detail of Streamlined filing compliance procedures, who, why, and what need to file. Also what other alternatives do you have.

An individual who has failed to file several years of tax returns in the United States and/or has been unable to report the foreign assets held in a foreign country can seek relief from penalties by following the requirements under this program.

IRS implemented the streamlined filing procedures on September 1, 2012, and Since then, this has been expanded and revised to include a more group of taxpayers of the United States.

The revised streamlined procedures include the following changes:

  • Now to include U.S. taxpayers who are living in the United States
  • Removal of the $1,500 tax limit, and
  • Removal of the risk assessment process related to the streamlined filing compliance procedure, which was implemented in 2012.

A U.S. individual taxpayer, an estate of the U.S. individual taxpayer, file under the revised, streamlined filing compliance procedures, whether he lives in the United States or Outside of the United Sales.

However, to file under the revised, streamlined filing compliance procedures, the taxpayer of the United States has to prove that the taxpayer failed to report the necessary financial assets held in foreign countries and pay the tax when it was due, was not his/her willful conduct on the taxpayer’s part.

The streamlined filing compliance procedures exist to remedy such cases that involve filing an amended or unfiled overdue return, resolving tax and penalties for reporting, and resolving the penalties that may emanate from filing amended or unfiled overdue returns.

There are requirements the IRS has laid out to meet before a taxpayer can apply the streamlined filing compliance procedures, which include:

1) The taxpayer was non-willful: A taxpayer will be required to certify in line with specific instructions that the failure to report such assets and income was not a result of non-willful conduct. Non-willful conduct is an activity that is not a result of negligence, lack of attention, mistake, or conducts that was in good faith lack of understanding of tax laws.

2) There has not been an initiation of an IRS Civil Examination: A taxpayer undergoing an IRS audit cannot submit under this program. A taxpayer under criminal investigation is also not eligible for the program.

3) The taxpayer must resolve previously filed amended and unfiled overdue returns and pay assessed penalties to be eligible.

4) Taxpayers need to have a valid tax identification number: to submit to the program, a taxpayer must have a tax identification number. A social security number will suffice if the taxpayer is a US citizen, resident, or US person. The submission can also be with a completed ITIN application.

The procedures were created to bring individuals who were late in reporting financial assets in foreign countries and income, and that can prove non-willful conduct into compliance with US tax laws.

Two parts are involved: the streamlined domestic Offshore procedures and the streamlined foreign offshore procedures. For the domestic procedures, the taxpayer has to meet the general procedures outlined above as well as be a US resident, which involves not meeting the no residency requirements set forth by the IRS. The taxpayer is also required to have filed previous returns, and the submission to the procedure is not an initial return. The streamlined foreign offshore procedures are for non-US residents. A US citizen and green card holder must have lived 330 days in a foreign country within 12 months. Non-US citizens and residents do not have to meet the 330 days test but have to meet the substantial presence test.

The taxpayer once files under either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures, taxpayer may not file OVDP. The taxpayer who files an OVDP voluntary disclosure letter on or after July 1, 2014, will not be eligible to file in the streamlined procedures.

Eligibility for the Streamlined Foreign Offshore Procedures (SFOP)

  1. meet the applicable non-residency requirement described below and
  2. have failed to report the income from a foreign financial asset and pay tax as required by U.S. law, and
  3. may have failed to file an FBAR (FinCEN Form 114, previously Form TD F 90-22.1) with respect to a foreign financial account, and
  4. such failures resulted from non-willful conduct.

A taxpayer who is eligible to use these SFOP and who complies with the instructions mentioned below, will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties.

  • File 3 years of unfiled overdue Federal Tax Returns
  • Report 6 years of FBARS
  • File form 14653 to certify tax delinquency was non-willful


RKB Accounting has expertise in cross-border taxation and has been providing accounting and taxation services for the last fifteen years in Canada and USA. RKB services include incorporating a business on both sides of the border, bookkeeping, sales tax, payroll, and corporate and personal income tax. RKB’s expertise includes cross-border tax planning, long-term tax planning, helping business start-ups, business structure planning, and resolving complex tax matters. RKB a CPA(Delaware), CA(India), and CIA(USA) has over 25 years of experience in accounting and taxation in dealing with various countries in the world.

Disclaimer: Information in the blog/post/article has been presented for a broad and simple understanding. This is not legal advice. RKB Accounting & Tax Services does not accept any liability for its application in any real situations. You need to contact your accountant or us for further information.

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