Streamlined Filing Compliance Procedures (SFCP): A Guide by Tax Relief Counsel

Understanding Streamlined Filing Compliance Procedures (SFCP)

For U.S. taxpayers living abroad or those who have unintentionally fallen out of compliance with their tax obligations, the Streamlined Filing Compliance Procedures (SFCP) offer a lifeline. The Internal Revenue Service (IRS) introduced this program to encourage non-compliant taxpayers to come forward, reduce penalties, and achieve compliance without the risk of severe financial repercussions.

At Tax Relief Counsel, a Washington, DC based tax law firm representing clients nationwide and internationally, we help individuals and businesses navigate SFCP efficiently and ensure they meet all necessary requirements.

Who Qualifies for SFCP?

SFCP is designed for taxpayers who:

• Failed to report foreign financial accounts or foreign income.
• Were unaware of their tax filing obligations.
• Are non-willful in their failure to comply with U.S. tax laws.

The program is divided into two categories:

• Streamlined Foreign Offshore Procedures (SFOP) – For U.S. citizens and resident aliens residing outside the U.S. who have not met tax obligations.
• Streamlined Domestic Offshore Procedures (SDOP) – For U.S. taxpayers residing in the U.S. who failed to report foreign financial assets or income.

Key Benefits of SFCP

Taxpayers eligible for SFCP can benefit in several ways:

• Reduced Penalties: Foreign residents may face no penalties, while domestic taxpayers benefit from a reduced penalty structure.
• Avoidance of Criminal Charges: By voluntarily coming forward, taxpayers significantly reduce the likelihood of criminal tax evasion investigations.
• Simplified Filing Requirements: Participants file only three years of tax returns and six years of FBARs (Foreign Bank Account Reports), compared to traditional audit procedures that may extend further back.

SFCP Eligibility Requirements

To qualify for SFCP, a taxpayer must:

• Certify that their failure to comply was non-willful (i.e., due to negligence, mistake, or misunderstanding rather than intentional evasion).
• Submit three years of amended or delinquent tax returns.
• File six years of FBARs (if applicable).
• Pay any taxes owed with interest.

Step-by-Step Guide to Filing Under SFCP

Step 1: Determine Eligibility

Before proceeding, taxpayers must assess whether they meet the non-willfulness requirement. Consulting an experienced tax attorney at Tax Relief Counsel can help determine eligibility and assess potential risks.

Step 2: Gather Necessary Documents

Taxpayers need to compile:

• Past three years of unfiled or amended tax returns.
• Six years of FBAR reports (if applicable).
• Proof of income from foreign and domestic sources.

Step 3: Prepare and File Tax Returns

The amended or late tax returns must be filed using Form 1040X (for amendments) and include any necessary schedules detailing foreign income.

Step 4: Submit FBARs

FBARs must be electronically filed via the Financial Crimes Enforcement Network (FinCEN) BSA E-Filing System.

Step 5: Certify Non-Willfulness

A Certification Statement (Form 14653 for SFOP or Form 14654 for SDOP) must be submitted to the IRS, explaining why non-compliance occurred.

Step 6: Pay Any Taxes and Penalties Owed

Taxes, interest, and applicable penalties must be paid at the time of submission.

Common Pitfalls to Avoid in SFCP Filing

• Failure to Meet the Non-Willfulness Standard – The IRS scrutinizes claims of non-willfulness. If a taxpayer’s circumstances suggest deliberate tax avoidance, they could face additional penalties or legal consequences.
• Incorrect or Incomplete Submissions – Errors in tax return filings, miscalculations, or missing documents can lead to delays or rejection. A tax attorney can ensure accuracy and compliance.
• Assuming SFCP is the Only Option – For some taxpayers, alternative solutions such as the Offshore Voluntary Disclosure Program (OVDP) or the Relief Procedures for Certain Former Citizens may be more suitable. A tax law expert can help determine the best approach.

Why Work With Tax Relief Counsel?

At Tax Relief Counsel, we specialize in tax litigation and compliance matters, representing individuals and businesses nationwide and internationally. Our experienced tax attorneys provide personalized legal strategies to help clients:

• Determine eligibility for SFCP.
• Reduce penalties and avoid legal complications.
• Ensure full compliance with IRS regulations.
• Defend against potential audits or investigations.

Take the First Step Toward Compliance

If you have unreported foreign assets or unpaid taxes and believe you qualify for the Streamlined Filing Compliance Procedures, now is the time to act. The IRS may modify or eliminate programs like SFCP in the future, making early action critical.

Contact Tax Relief Counsel today at (202) 630-4095 for a confidential consultation and let our tax attorneys guide you toward financial peace of mind.