IRS Streamlined Filing Compliance Procedures

For U.S. citizens and green card holders abroad, U.S. tax obligations are a fact of life. Citizenship-based taxation means you must file U.S. tax returns and report foreign financial accounts, regardless of where you live. Many expats are unaware of these rules and fall into non-compliance unintentionally. If you've discovered past filing oversights, the IRS Streamlined Filing Compliance Procedures (SFCP) offer a crucial lifeline an amnesty-like program to get back on track without facing severe penalties. As of July 25, 2025, this vital program remains fully available for non-willful taxpayers.

What Are the Streamlined Filing Procedures?

The IRS Streamlined Filing Compliance Procedures offer a simplified pathway for U.S. taxpayers to correct past failures in reporting foreign income and financial accounts. The program is specifically for individuals whose conduct was non-willful—a term that covers negligence, inadvertence, mistakes, or genuine confusion about U.S. tax law, as opposed to deliberate tax evasion.

Unlike the now-closed Offshore Voluntary Disclosure Program (OVDP), which imposed much higher penalties, the SFCP provides significantly reduced or completely waived penalties. For eligible taxpayers, it eliminates failure-to-file, failure-to-pay, accuracy-related, and information return penalties. Critically, the formidable penalties for failing to file Foreign Bank Account Reports (FBARs) are also waived for most participants.

SFOP vs. SDOP: A Head-to-Head Comparison

The IRS offers two distinct streamlined programs based on your residency status. The Streamlined Foreign Offshore Procedures (SFOP) are for U.S. taxpayers residing abroad, while the Streamlined Domestic Offshore Procedures (SDOP) are for those residing in the United States. Understanding the difference is key to selecting the right path.

Aspect	Streamlined Foreign Offshore (SFOP)	Streamlined Domestic Offshore (SDOP)
Eligible Taxpayer	U.S. person residing outside the U.S. (must meet non-residency test)	U.S. person residing inside the U.S.
Offshore Penalty	0% (No penalty)	5% of the highest aggregate value of unreported foreign financial assets
Tax Return Filing	Can file original delinquent returns (if never filed) or amended returns	Must file amended returns (Form 1040-X) only; prior returns must be filed
Key Requirement	Certify non-residency status and non-willful conduct	Certify non-willful conduct
Certification Form	Form 14653, Certification by U.S. Person Residing Outside of the U.S.	Form 14654, Certification by U.S. Person Residing in the U.S.
Primary Benefit	Penalty-free path to correct tax and FBAR filings	Significant reduction in penalties for correcting undisclosed foreign assets

Step-by-Step Submission Checklist for 2025

Accuracy is paramount. All streamlined filings must be submitted on paper, as electronic filing is not an option.

For Streamlined Foreign Offshore (SFOP) Submissions:

• Three Years of Tax Returns: File delinquent or amended Form 1040s for the last three years whose due date has passed. For a submission in mid-2025, this covers tax years 2022, 2023, and 2024.
• Six Years of FBARs: File delinquent FinCEN Forms 114 electronically via the BSA E-Filing System. Select "Other" for the late reason and write "Streamlined Filing Compliance Procedures."
• Non-Willful Certification: Complete and sign Form 14653. Attach a copy to each tax return.
• Marking and Mailing: Write "Streamlined Foreign Offshore" in red ink on top of each return and mail the package to the designated IRS address in Austin, TX.

For Streamlined Domestic Offshore (SDOP) Submissions:

• Three Years of Amended Tax Returns: File Form 1040-X for the last three years to correct past filings.
• Six Years of FBARs: File delinquent FinCEN Forms 114 electronically, same as for SFOP.
• Certification and Penalty Calculation: Complete and sign Form 14654, which includes the 5% offshore penalty calculation.
• Payment: Include a check for all back taxes, interest, and the 5% penalty.
• Marking and Mailing: Write "Streamlined Domestic Offshore" in red ink on top of each return and mail the package to the designated IRS address in Charlotte, NC.

Crafting a Compelling Non-Willful Narrative

Your statement on Form 14653 or 14654 is the most critical part of your submission. A vague or unconvincing narrative is the primary reason for rejection. Your story must be honest, specific, and credible.

• Be Factual and Specific: Detail your personal and financial background. Explain why you were unaware of your obligations, citing your ties to the U.S. (or lack thereof), reliance on incorrect advice, or the complexities of tax law.
• Explain Your Actions: Describe the "trigger event" that made you aware of your filing requirements and the steps you took to become compliant.
• Maintain a Good-Faith Tone: Focus on your honest mistakes and misunderstandings. The narrative should clearly demonstrate that your actions were negligent, not willful.

Risks, Penalties, and Alternatives

While the SFCP is an excellent program, it is not without risk. Your submission can be selected for audit. If the IRS determines your conduct was willful, your case can be moved to a full examination, where all applicable penalties could be applied. If you are ineligible for the SFCP, alternatives exist, including the Delinquent FBAR/Information Return Submission Procedures or the IRS Voluntary Disclosure Practice for willful cases.

Take Action: Achieve Tax Compliance Today

The IRS Streamlined Filing Compliance Procedures provide a powerful opportunity for U.S. expats to resolve past tax issues efficiently. Navigating the SFCP requires deep expertise. At American Expa CPA, our specialists manage the entire process, ensuring a complete and compelling submission. Avoid the risks of a quiet disclosure or a rejected application. Schedule your free U.S. expat tax consultation today and reclaim your peace of mind.