The Streamlined Filing Compliance Procedures (SFCP) are the primary IRS path for non-willful US taxpayers to come into compliance after failing to report foreign income or file required international information returns. Originally introduced in 2012 and significantly expanded in 2014, SFCP offers two tracks: the Streamlined Foreign Offshore Procedures (SFOP) for non-resident US taxpayers with no Title 26 penalty, and the Streamlined Domestic Offshore Procedures (SDOP) for US-resident non-willful taxpayers with a 5% Title 26 Miscellaneous Offshore Penalty on the highest aggregate balance of foreign financial assets. Both tracks require 3 years of tax returns (filed for SFOP, amended for SDOP), 6 years of FBARs (FinCEN 114), and certification of non-willfulness under penalty of perjury on Form 14653 (foreign) or Form 14654 (domestic). The current Form 14653 is the March 2025 revision. SFCP is unavailable to taxpayers under criminal investigation, currently under civil examination, or whose conduct was willful - those paths are the Voluntary Disclosure Practice (VDP) or DIIRSP for missing information returns where all income was already reported.
SFOP (Streamlined Foreign Offshore Procedures):
• Form 14653 - Certification by US Person Residing Outside the United States
• Eligibility: 330 full days OUTSIDE the US in at least 1 of the 3 most recent tax years AND no US abode during those years
• Penalty: $0 Title 26 Miscellaneous Offshore Penalty
• FBAR penalty: Waived
• 3 years of ORIGINAL or AMENDED returns (delinquent original returns accepted)
• 6 years of delinquent FBARs
SDOP (Streamlined Domestic Offshore Procedures):
• Form 14654 - Certification by US Person Residing in the United States
• Eligibility: US resident or fails SFOP residency test
• Penalty: 5% Title 26 Miscellaneous Offshore Penalty on highest aggregate year-end balance of unreported foreign financial assets across the 6-year covered period
• FBAR penalty: Waived
• Must have FILED original returns timely for each of the 3 covered tax years (amendments needed; cannot do delinquent originals)
• 3 years of AMENDED returns (1040-X)
• 6 years of delinquent FBARs
| SFOP Residency Requirement | Detail |
|---|---|
| Test for individual US citizens / green card holders | In AT LEAST ONE of the most recent 3 tax years for which the US tax return due date has passed, the individual: (a) did NOT have a US abode, AND (b) was physically OUTSIDE the United States for at least 330 full days |
| Test for non-resident aliens (newly resident) | In AT LEAST ONE of the most recent 3 tax years for which the US tax return due date has passed, the individual did NOT meet the §7701(b)(3) substantial presence test (i.e., did not become a tax resident) |
| "US abode" definition | Place where individual primarily lives. Maintaining a US home, returning regularly to US residence, having US family ties may constitute US abode even if physically present abroad. Facts and circumstances. |
| "330 full days" definition | 24-hour periods beginning at midnight, fully outside the US. Travel days FROM US to foreign country: arrival day counts as foreign; departure day counts as US. Same as §911 physical presence test. |
| Joint filer treatment | BOTH spouses must individually satisfy the SFOP residency test for the couple to file under SFOP. If only one spouse qualifies, SFOP unavailable - SDOP may apply. |
| Component | Detail |
|---|---|
| 3 years of tax returns | For the 3 most recent years for which the US tax return due date has passed. Original returns if not previously filed; AMENDED if previously filed but income unreported. |
| 6 years of FBARs | FinCEN Form 114 - filed electronically via BSA E-Filing System. Cover the 6 most recent years for which the due date has passed. Reference "Streamlined Filed Pursuant to Section ... [referencing eligibility]" on each FBAR. |
| Form 14653 (Certification) | March 2025 revision. Certified under penalty of perjury. Includes non-willfulness narrative, residency test certification, signature. |
| Required international information returns | All applicable forms - Form 5471, 8865, 8858, 8938, 3520, 3520-A, 8621 (PFIC), etc., for each of the 3 covered years. |
| Tax + interest payment | Pay all tax shown on the 3 returns plus interest under §6601 from original due date. |
| Marking | Write "Streamlined Foreign Offshore" in RED ink at the TOP of the first page of each amended tax return and each information return. NOT on FBARs. |
| Submission method | Paper mail to Internal Revenue Service, 3651 South I-H 35, Stop 6063 AUSC, Attn: Streamlined Procedures, Austin, TX 78741. NOT to standard processing center. |
| Form 14653 placement | Original signed Form 14653 with submission package. Copies attached to each tax return and each information return (NOT to FBARs). |
| SDOP Requirement | Detail |
|---|---|
| Filed original tax returns timely | Must have FILED a US tax return for each of the 3 covered years (timely or with extension). UNLIKE SFOP, delinquent original returns are NOT eligible for SDOP. |
| Failed to report income or file required forms | Did not report income from foreign financial assets, OR failed to file required international information returns (FBAR, Form 8938, 5471, 8865, 8858, 3520, etc.), OR both. |
| Non-willful conduct | Negligence, inadvertence, mistake, or good-faith misunderstanding. Certified on Form 14654 under penalty of perjury. |
| Not under exam, criminal investigation, or contacted by IRS regarding foreign accounts | If the IRS has initiated examination or criminal investigation, SDOP is unavailable. |
| SFOP not available (failed residency test) | If SFOP residency test is met, the taxpayer should file under SFOP (no penalty), not SDOP |
| Penalty Computation Step | Detail |
|---|---|
| Identify covered period | Most recent 6 years for FBAR purposes; most recent 3 years for tax/Form 8938 purposes |
| For each asset / each year | Determine if the foreign financial asset was properly reported on: (a) FBAR (for FBAR-covered year), AND (b) for the 3 most recent tax years, on Form 8938 if applicable AND on tax return if income-generating |
| If properly reported on all applicable filings | Asset value is ZERO for penalty base for that year |
| If NOT properly reported on at least one applicable filing | Asset value at December 31 (year-end) included in penalty base for that year |
| Aggregate year-end balances per year | For each year in the 6-year period, sum the unreported asset values at December 31 |
| Select the highest aggregate year | The HIGHEST aggregate year-end total across the 6 years becomes the penalty base |
| 5% penalty | Multiply penalty base by 5%. This is the Title 26 Miscellaneous Offshore Penalty paid with submission. |
Facts: US Client failed to report a Swiss bank account on FBARs from 2020-2025 (6 years) and on Form 8938 for 2023-2025 (3 most recent tax years). Income from the account was small and not reported on tax returns 2023-2025. Year-end balances: 2020 $300,000; 2021 $350,000; 2022 $420,000; 2023 $400,000; 2024 $380,000; 2025 $360,000. Also has a properly-reported Schwab account in US.
Step 1 - Identify covered period: 6 years for FBAR (2020-2025), 3 most recent years for Form 8938 (2023-2025).
Step 2 - Per asset, per year analysis (Swiss account):
• 2020 FBAR not filed AND no income on tax return → $300,000 in penalty base
• 2021 same → $350,000
• 2022 same → $420,000
• 2023 FBAR not filed AND Form 8938 not filed AND no income on tax return → $400,000
• 2024 same → $380,000
• 2025 same → $360,000
Step 3 - Highest aggregate year: 2022 at $420,000.
Step 4 - 5% penalty: $420,000 × 5% = $21,000 Title 26 Miscellaneous Offshore Penalty.
Compared to alternative penalties: FBAR willful penalty would be greater of $100,000 or 50% of account balance per year - potentially $200,000-$250,000+ for this case. FBAR non-willful is $10,000 per violation. Form 8938 is $10,000 per violation plus continuation. The SDOP $21,000 is a fraction of potential exposure.
| Component | Detail |
|---|---|
| 3 years of AMENDED returns | Form 1040-X for each of the 3 covered tax years. Include all originally-omitted income, deductions, credits. |
| 6 years of FBARs | FinCEN 114 - delinquent filings for 6 most recent years |
| Form 14654 (Certification) | Certified under penalty of perjury. Non-willfulness narrative. Penalty computation. Signed. |
| Required international information returns | All applicable - 5471, 8865, 8858, 8938, 3520, 8621, etc. |
| Tax + interest + 5% penalty payment | Pay tax shown on amended returns + §6601 interest + 5% Title 26 Miscellaneous Offshore Penalty |
| Marking | Write "Streamlined Domestic Offshore" in RED ink at TOP of each amended return and each information return |
| Submission method | Paper mail to: Internal Revenue Service, 3651 South I-H 35, Stop 6063 AUSC, Attn: Streamlined Procedures, Austin, TX 78741 |
Both Form 14653 and Form 14654 require a written narrative explaining why the taxpayer's conduct was non-willful. This is the single most important component of any SFCP submission. A weak, generic, or inconsistent narrative is the leading cause of SFCP rejection or audit follow-up.
| Non-Willfulness Narrative - Required Elements |
|---|
| Specific facts: when, how, where the foreign asset was acquired |
| Specific facts: why the asset was not reported on tax returns and FBAR/Form 8938 |
| Source of funds in the foreign account (inheritance, prior earnings, gift, etc.) |
| What the taxpayer knew about US reporting obligations at the relevant times |
| How and when the taxpayer became aware of the obligations |
| What advisors / professionals the taxpayer consulted (or did not consult) |
| Affirmative steps taken upon learning of the obligations |
| Statement that conduct was NOT willful - was due to negligence, inadvertence, mistake, or good-faith misunderstanding |
| Conduct | Willful or Non-Willful |
|---|---|
| Negligence (failure to use ordinary care) | NON-WILLFUL - eligible for SFCP |
| Inadvertence / oversight | NON-WILLFUL - eligible |
| Mistake (computational, factual) | NON-WILLFUL - eligible |
| Good-faith misunderstanding of the law | NON-WILLFUL - eligible (e.g., believed account in country of birth wasn't subject to US reporting) |
| Did not know about FBAR or Form 8938 reporting | NON-WILLFUL if reasonable under circumstances |
| Knew about reporting and intentionally failed to comply | WILLFUL - NOT eligible; consider VDP |
| Knew about reporting and reckless disregard of obligations | WILLFUL - NOT eligible (post-Bedrosian, Williams standards) |
| "Willful blindness" - deliberately avoiding learning about obligations | WILLFUL - NOT eligible |
| Used foreign account to hide US-source income | WILLFUL - NOT eligible; significant criminal exposure |
| Specifically instructed advisor to not report account | WILLFUL - NOT eligible |
| Disqualifying Condition | Alternative Path |
|---|---|
| Under civil examination by IRS for any tax year | Must conclude exam first; SFCP unavailable while exam pending |
| Under criminal investigation | SFCP closed; VDP may be available for pre-investigation criminal protection |
| IRS has initiated contact regarding foreign account | SFCP closed |
| Previously made quiet disclosure | Generally SFCP unavailable; consult with practitioner |
| Previously participated in OVDP or VDP | SFCP unavailable |
| Conduct was willful | SFCP not appropriate; consider VDP |
| Failure relates only to delinquent FBARs (no unreported income) | Use Delinquent FBAR Submission Procedures - no penalty if reasonable cause |
| Failure relates only to information returns (no unreported income) | Use Delinquent International Information Return Submission Procedures (DIIRSP) |
| Procedure | Best For | Cost |
|---|---|---|
| SFOP | Foreign-resident non-willful taxpayer with unreported income AND/OR missing forms | Tax + interest only; $0 penalty |
| SDOP | US-resident non-willful taxpayer with previously-filed returns but unreported income AND/OR missing forms | Tax + interest + 5% of highest aggregate balance |
| Delinquent FBAR Submission Procedures | Missing FBARs only; all income reported on tax returns; reasonable cause | No FBAR penalty |
| DIIRSP (Delinquent International Information Return Submission Procedures) | Missing information returns only (5471, 8865, 8858, 3520, etc.); all income reported on tax returns; reasonable cause | Reasonable cause typically waives penalties |
| IRS Voluntary Disclosure Practice (VDP) | Willful conduct; criminal exposure exists | Tax + interest + 75% civil fraud penalty on tax year with highest tax liability + 50% FBAR penalty on max account value in disclosure period |
| Quiet disclosure | NEVER recommended | No protection; full audit and penalty exposure if discovered |
Under Rev. Proc. 2014-55, eligible US persons with Canadian retirement plans (RRSPs, RRIFs) qualify for automatic deferral of US tax on accrued but undistributed earnings. The Procedure also affects SFCP submissions involving Canadian retirement plans:
| Canadian Retirement Plan Rule | Detail |
|---|---|
| SDOP exclusion from 5% penalty base | Canadian retirement plans qualifying under Rev. Proc. 2014-55 are EXCLUDED from the 5% Title 26 penalty base |
| Narrative requirement | State on Form 14654 that taxpayer meets "eligible individual" requirements under §4.01 of Rev. Proc. 2014-55 |
| Reporting limited to accrued but undistributed earnings | State that reporting was limited to accrued but undistributed earnings during the Streamlined-covered years |
| SDOP not needed if only Canadian plan | If Client's ONLY issue is unreported Canadian retirement plan accrued earnings, SDOP is not needed - the deferral is automatic under Rev. Proc. 2014-55. SFCP would only be needed if other foreign assets or income were unreported. |
| FBAR and Form 8938 still apply | Canadian retirement plans are foreign financial accounts/assets; FBAR and Form 8938 reporting still required |
| Stage | Timeframe |
|---|---|
| IRS receipt and initial intake | Weeks 1-2 |
| IRS review of submission | Months 2-6 typical; complex cases longer |
| Possible IRS follow-up questions | Address specific aspects of non-willfulness narrative, penalty computation, or asset valuation |
| Acceptance | No formal acceptance letter typically issued; taxpayer confirms processing via transcripts |
| Refunds (if any) from amended returns | Processed normally per IRS procedures |
| Disqualification | If IRS determines conduct was willful or other ineligibility, returns will be processed as filed but taxpayer loses SFCP penalty relief; full FBAR/Form 8938/§6038 penalties may apply |
| Audit risk post-submission | SFCP submission does NOT immunize from future audit. IRS may audit any returned year (SOL still open under §6501(c)(8) for years involving Form 8938 / Form 5471 / etc. until filed) |
SDOP imposes a 5% penalty; SFOP is penalty-free. A US person who satisfies the SFOP residency test (330 days outside US in at least 1 of past 3 years + no US abode) should file SFOP, not SDOP. Practitioners sometimes default to SDOP for "anyone with US ties" - check the test carefully. Even a US person with substantial US connections who spent 11 months abroad in any one of the past 3 years may qualify for SFOP.
BOTH spouses on a joint return must independently meet SFOP residency. If one spouse stayed in US while other was abroad, SFOP is unavailable for the couple. Two options: (a) file SDOP for the couple, (b) file MFS - allowing the qualifying spouse to use SFOP and the non-qualifying spouse to use SDOP. Modeling required.
Each amended tax return and each information return must have "Streamlined Foreign Offshore" or "Streamlined Domestic Offshore" written in RED ink at the TOP of the first page. Failure to mark properly routes the submission through normal IRS processing - missing the SFCP penalty relief. Hand-marking with red pen is acceptable; printer red also acceptable.
"I didn't know" is not a narrative. Successful SFCP narratives include specific facts about how the account was opened, what the taxpayer was told (or not told), when learning occurred, why no advisor was consulted, and steps taken upon learning. Match narrative tone to taxpayer sophistication - a tax attorney claiming ignorance fails the credibility test.
SDOP penalty base depends on whether asset was reported on FBAR (6-year period) and Form 8938 (3-year period). Practitioners who treat all unreported assets as fully penalty-baseable miss the carve-out for assets that WERE on one filing but not another. For example: an asset on FBAR but not on Form 8938 for one year is in penalty base for that year (because Form 8938 was required); the same asset on both for other years is excluded.
Falsely certifying non-willfulness under penalty of perjury exposes taxpayer to §7206(1) criminal liability and IRS revocation of SFCP relief. Practitioner must independently evaluate willfulness - cannot simply accept Client's self-characterization. If facts suggest willful conduct (knowledge of obligation, deliberate concealment, large amounts, sophistication), advise VDP path instead.
If the ONLY failure is unfiled international information returns (Form 5471, 8865, 8858, 3520, etc.) and ALL income was correctly reported on the original tax returns, DIIRSP is the path - not SFCP. DIIRSP is simpler, faster, and does not require non-willfulness certification. Reasonable cause statement attached to the late information returns.
Canadian RRSPs and RRIFs qualifying under Rev. Proc. 2014-55 are excluded from the SDOP 5% penalty base. Practitioners who include Canadian retirement plan values in the penalty base overstate the penalty. Must include narrative statement on Form 14654 invoking the Rev. Proc. 2014-55 exclusion.
SFCP submissions go to a specific Austin processing address - NOT the standard IRS processing centers. Submission to the wrong address delays processing and may cause SFCP relief to be missed. Verify current address from IRS.gov before mailing.
SFCP relief covers monetary penalties only. The submission does NOT immunize the taxpayer from audit. The §6501(c)(8) SOL remains open on years where Form 8938, 5471, 8865, 8858, 3520, etc. were not timely filed - until those forms are filed via SFCP. After SFCP, normal SOL applies to those years going forward, but the substantive correctness of returns and information remains subject to examination.
Primary authority: IRS Streamlined Filing Compliance Procedures (effective June 18, 2014; expanded; current form revisions March 2025). Streamlined Foreign Offshore Procedures (SFOP) - Form 14653 "Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures." Streamlined Domestic Offshore Procedures (SDOP) - Form 14654 "Certification by U.S. Person Residing in the United States for Streamlined Domestic Offshore Procedures." Title 26 Miscellaneous Offshore Penalty (5% for SDOP only; 0% for SFOP). 31 U.S.C. §5314 (FBAR reporting authority). 31 U.S.C. §5321 (FBAR penalty - willful 50% of balance or $100,000 greater; non-willful $10,000 per violation). IRC §6038 (Form 5471, 8865, 8858 information reporting). §6038A (Form 5472). §6048 (Form 3520 / 3520-A). §6038D (Form 8938 FATCA - $10K base penalty plus $50K continuation). §6501(c)(8) (SOL on entire return stays open until information return filed). §6601 (interest on tax). §6651 (failure to file/pay penalties - waived under SFCP). §6662 (accuracy-related - waived). §7203 (criminal failure to file). §7206(1) (perjury on Form 14653/14654 certification). §7701(b)(3) (substantial presence test for non-residents). §911(d)(1)(B) (330-day physical presence test - same standard for SFOP residency). Rev. Proc. 2014-55 (Canadian retirement plan automatic deferral; exclusion from SDOP penalty base). Delinquent FBAR Submission Procedures (for missing FBARs only). Delinquent International Information Return Submission Procedures (DIIRSP - for missing info returns only). IRS Voluntary Disclosure Practice (VDP) per IRS-CI policy (for willful conduct). United States v. Bedrosian, 912 F.3d 144 (3d Cir. 2018) (willfulness standard). United States v. Williams, 489 F. App'x 655 (4th Cir. 2012) (willful blindness). Submission address: Internal Revenue Service, 3651 South I-H 35, Stop 6063 AUSC, Attn: Streamlined Procedures, Austin, TX 78741. FinCEN Form 114 (FBAR) - filed via BSA E-Filing System.