Streamlined Domestic Offshore Procedures (SDOP) allows U.S. taxpayers to come into compliance with IRS tax and reporting requirements for foreign financial assets or accounts that were unintentionally omitted. ZR Associates helps scrutinize eligibility and evaluate risk factors, particularly around whether the violations were non-willful.
To participate in SDOP, individual U.S. taxpayers, or the estates of individual U.S. taxpayers, must meet general eligibility criteria and additional domestic-specific requirements, including:
Non-Residency Requirements: The taxpayer must not meet the non-residency criteria as outlined in the instructions for Streamlined Foreign Offshore Procedures.
Filing U.S. Tax Returns: The individual taxpayer must have filed a U.S. tax return for each of the most recent three years for which the due date has passed.
Failure to Report Foreign Income: The individual taxpayer must have failed to report gross income from a foreign financial asset or account, and also failed to pay the U.S. taxes owed on those assets or accounts.
Failure to File FBAR: The individual may have also failed to file FBAR forms or other informational reporting obligations for their foreign financial assets or accounts.
Non-Willful Omissions: The omissions must be due to non-willful conduct, meaning negligence, inadvertence, mistake, or a good faith misunderstanding of the law’s requirements. This is critical in ensuring eligibility for SDOP.
IRS Audit Risk: While filing an SDOP does not automatically trigger an IRS audit, taxpayers remain subject to the possibility of one. Therefore, ZR Associates emphasizes preparing to defend the SDOP filing and demonstrate non-willfulness.
Fraud Concerns: Taxpayers must show that there was no fraud involved in the omissions, which requires solid evidence and a clear explanation of the oversight.
