Streamlined Domestic Offshore Procedures (SDOP)

For U.S. taxpayers who have offshore financial accounts or assets, ensuring compliance with tax regulations is of paramount importance. The Streamlined Domestic Offshore Procedures (SDOP) offer a pathway for non-compliant taxpayers to rectify their tax obligations without facing excessive penalties.

What is Streamlined Domestic Offshore Procedures (SDOP)?

The SDOP is a subset of the IRS’s Streamlined Filing Compliance Procedures, designed to help taxpayers living in the United States or with a domestic presence who have failed to report their offshore financial accounts or assets. The primary goal of SDOP is to bring these taxpayers back into compliance while minimizing potential penalties.

Eligibility

To qualify for SDOP, taxpayers must meet certain eligibility requirements:

• Non-Willful Conduct: Taxpayers must certify that their failure to report foreign financial accounts or assets was due to non-willful conduct, which means it wasn’t intentional or deliberate.
• Residency: Taxpayers must meet the IRS definition of residing in the United States. This includes U.S. citizens, lawful permanent residents, and individuals who meet the substantial presence test.
• Filed Returns: Eligible taxpayers must have failed to report income from foreign financial accounts and assets on their tax returns, including required information returns such as the Report of Foreign Bank and Financial Accounts (FBAR).

Benefits of SDOP

• Reduced Penalties: One of the primary benefits of SDOP is the reduced penalty structure. Under SDOP, eligible taxpayers are subject to a 5% penalty on the highest aggregate balance of their foreign financial accounts or assets in the last three years. This is a significant reduction compared to the potential penalties for non-compliance.
• No Criminal Penalties: Unlike some other compliance programs, SDOP generally does not expose taxpayers to criminal penalties or prosecution.

Key Considerations

• Non-Willful Certification: Taxpayers must provide a detailed statement explaining their non-willful conduct that led to the failure to report offshore financial accounts or assets.
• Amended Tax Returns: Eligible taxpayers are required to file amended tax returns for the last three years, including any required information returns. This includes reporting unreported income from foreign assets.
• FBAR Filing: Taxpayers must also file FBARs for the last six years, if applicable, to report their foreign financial accounts.
• Pay Outstanding Taxes: Taxpayers must pay any outstanding taxes and interest associated with the unreported income.

Contact Us Today

The Streamlined Domestic Offshore Procedures offer a valuable opportunity for non-compliant taxpayers to rectify their tax obligations with reduced penalties. Dimov Tax Associates will guide you through the SDOP process, ensuring accurate and complete documentation, non-willful certification, and compliance with all filing requirements. By leveraging SDOP you will be able to mitigate potential financial repercussions while re-establishing their compliance with U.S. tax regulations. Contact us below to get started.