Streamlined filing compliance procedures for expats
If you’ve been living outside the United States for years, it might seem natural to assume your US tax obligations ended with your last paycheck on American soil. But they didn’t. The United States taxes its citizens and green card holders on their worldwide income, and in most cases, you’re required to file a return once your income passes relatively modest thresholds.
Many expats miss these filings – not out of evasion, but because of moves, overseas payroll systems that only withhold local taxes, or simply not knowing the rules. To address these situations, the IRS introduced the streamlined filing compliance procedures (SFCP), giving taxpayers a path back to good standing without the crushing penalties normally applied.
In this guide, we’ll break down what the streamlined procedures are, how they work, how they compare to other IRS compliance options, and the practical steps you can take to prepare a strong submission.
This article is brought to you by Taxes for Expats (TFX) – a top-rated US tax firm trusted by Americans and green card holders in 190+ countries. Not sure if the streamlined procedures apply to your situation? Our experts will review your case, confirm your eligibility, and guide you through the next steps – contact us.
What are streamlined filing compliance procedures?
The streamlined filing compliance procedures (SFCP) are an IRS program designed to help taxpayers who failed to report foreign income or accounts get back into compliance without facing the harsh penalties normally imposed.
These procedures apply only to non-willful noncompliance – cases where lapses resulted from error, negligence, or misunderstanding, rather than deliberate concealment.
Key benefits:
- no penalties for expats who qualify under the non-residency test
- simplified compliance with fewer filing requirements
- amnesty-like relief for taxpayers whose mistakes were non-willful
There are two tracks:
The streamlined foreign offshore procedures apply to taxpayers who meet a nonresidency test. The streamlined domestic offshore procedures cover those who do not meet that test. Both tracks require you to file the missing returns for a limited lookback period, submit late foreign bank account reports (FBARs) where needed, pay any tax and interest due, and sign a certification explaining your nonwillful conduct.
The IRS streamlined procedure may be also used for filing amended returns to claim retroactive relief on qualified foreign pension plans eligible for tax deferral.
Who can use streamlined procedures? (eligibility criteria)
American expats and US persons with foreign bank accounts who haven’t filed tax returns or FBARs may qualify for the streamlined filing compliance procedures (SFCP). To participate, you must file the last three years of tax returns and six years of FBARs. However, each procedure also has its specific requirements and details.
Streamlined foreign offshore procedures (SFOP)
To qualify, you must also meet the non-residency requirement. This isn’t about citizenship or physical presence – you must have spent at least 330 full days outside the US in one of the last three tax years and didn’t maintain a US home. SFOP eliminates all penalties, including failure-to-file and FBAR penalties.
Streamlined domestic offshore procedures (SDOP)
US residents who don’t meet the non-residency requirement can use SDOP. This option includes a 5% penalty on the highest balance of unreported foreign financial assets during the covered period. This penalty applies in place of the more severe penalties for willful noncompliance.
IRS “non-willfulness” standard
To qualify for streamlined procedures, you must demonstrate non-willfulness – it’s the main criteria. Non-willfulness means your failure to comply with US tax obligations was due to negligence, misunderstanding, or oversight – not an intentional attempt to conceal income or assets.
- Non-willful conduct includes situations caused by inadvertence, mistake, or a good-faith misunderstanding of the law. For example, an engineer who left the US years ago, paid taxes abroad, and only recently discovered that US returns and foreign account reports were still required would typically be considered non-willful.
- Willful conduct, by contrast, involves deliberate actions to avoid reporting – such as moving assets offshore to hide them from the IRS or disregarding professional advice to file.
If your noncompliance was willful, the streamlined program is not available for you. Instead, the IRS directs such cases to the Voluntary Disclosure Practice. Also, you cannot use the streamlined procedures for years that are currently already under IRS examination.
Common scenarios for expats to qualify for streamlined procedures
The streamlined program has helped thousands of Americans abroad get back on track with their US tax obligations. Many people only discover, often in stressful moments, that they’ve fallen behind on filings without realizing it.
If any of the situations below sound familiar (and even if yours isn’t listed, we’ve likely seen it before), you are not alone, and there is a clear path forward.
Accidental expats
Born in the US but raised elsewhere? You may hold citizenship tax obligations you never knew existed. Streamlined procedures offer a practical way to catch up without facing severe penalties.
Career expats
Working abroad and paying local taxes for years? Many assume this fulfills all obligations, only to learn the US still requires annual returns and foreign account disclosures. Streamlined procedures help resolve these filings quickly and cleanly.
Married to a non-US spouse
Sharing accounts or property with a non-US partner can trigger complex reporting rules even if most assets belong to your spouse. With streamlined procedures, you can protect your family from unexpected penalties.
Retirees abroad
Receiving a foreign pension or investment income? These often require additional US reporting that many retirees overlook. The streamlined path allows you to amend or file past returns, properly disclose pensions, and safeguard your retirement savings.
Entrepreneurs and freelancers overseas
Running a business abroad involves added challenges: PFIC reporting, foreign corporate ownership, and coordinating US self-employment taxes with local systems. Streamlined procedures can bring your filings into compliance.
Each of these situations can create fear of penalties, legal risk, or barriers to opening bank accounts or renewing documents. If you see yourself in any of these profiles, streamlined procedures were designed with you in mind. With the right support, you can catch up and move forward with confidence.
Step-by-step guide to filing under streamlined procedures
Step 1. Gather necessary documents.
You’ll need your last three years of tax returns and the last six years of FBARs for any foreign accounts exceeding $10,000. Additional documents might include income records, foreign tax statements, and account statements.
Step 2. File missing returns.
Submit completed tax returns for the last three years, including any credits, exclusions, and deductions like foreign earned income exclusion, foreign housing exclusion, or child tax credit. Then calculate and pay any taxes owed, including interest.
Before you amend or file, double-check your exclusion eligibility so your FEIE and housing entries on Form 2555 align with your qualifying period.
Step 3. Report foreign accounts via FBAR.
Use FinCEN Form 114 to report offshore accounts for the last six years. Make sure to report all accounts held outside the US, including savings, investments, pensions, and insurance with a cash value, if the total exceeds $10,000. FBAR is filed with FinCEN through the BSA E-Filing System, not with the IRS, and is separate from your US tax return.
Step 4. Submit certification of non-willful conduct.
Complete Form 14653 (for SFOP) or Form 14654 (for SDOP), including a written explanation for why you didn’t comply. A vague or incomplete explanation could disqualify you from the program.
Step 5: Mail the package to the IRS.
Send all forms and payments to the appropriate IRS processing center.
If you don’t owe any taxes, you won’t hear from the IRS. They don’t send confirmation letters. If you don’t hear back in three months, that’s a good sign that your tax account is in good standing.
Required forms and documents
To complete the streamlined filing process, you may need the following IRS forms.
- Form 1040 – The standard income tax return required for all US citizens
- FinCEN Form 114 – Report of Foreign Bank and Financial Accounts (FBAR)
- Form 14653 or 14654 – Certification of non-willful conduct
- Form 2555 Foreign earned income exclusion (FEIE) – Allows expats to exclude up to $126,500 (2024 limit, adjusted annually) of foreign income from US taxes
- Form 1116 Foreign tax credit (FTC) – Offers a dollar-for-dollar reduction in US tax liability based on foreign taxes paid
- Form 8938 (FATCA report) – FATCA is required if foreign assets exceed $200,000 on the last day of the tax year or $300,000 at any point ($400,000 and $600,000 for married taxpayers filing jointly).
Potential pitfalls and how to avoid them
Here are some common mistakes to avoid when using streamlined filing compliance procedures:
1. Lack of a well-documented certification of non-willfulness: The key requirement is that your failure to file was non-willful. When submitting your certification letter, you must explain why your non-compliance was not intentional.
2. Failing to file all required tax returns and FBARs: Some taxpayers mistakenly believe they only need to submit tax returns for missing years. As mentioned above, you need to file the last three years of taxes and six years of FBARs.
3. Underreporting foreign income: All foreign income, including interest, dividends, and rental income, must be reported on your return. If the IRS discovers unreported income, your submission may be rejected, and penalties could apply.
4. Ignoring additional reporting requirements for foreign entities: If you own or have a significant interest in a foreign corporation, trust, or partnership, you may need to file Form 5471 (foreign corporations) or Form 3520/3520-A (foreign trusts).
5. Filing incorrect or incomplete amended returns: For those required to amend prior tax returns as part of the program, errors in the amended filings may lead to rejection or additional IRS inquiries.
What to do if you don’t qualify for streamlined filing procedures
If you don’t qualify for the streamlined filing amnesty program, your next steps depend on the reason for ineligibility.
If your non-compliance was willful, you may need to consider the Voluntary Disclosure Program (VDP), which involves higher penalties but can help reduce the risk of criminal charges. If you were required to file international informational forms (e.g., Form 5471 for foreign corporations) but have otherwise reported all income, the Delinquent Informational Return Program might be an option.
In case you’re only missing FBARs but have reported all related income, the Delinquent FBAR Submission Procedures allow compliance without penalties.
Consult a tax professional today
At first glance, the streamlined process may seem straightforward: a few years of tax returns, FBARs, and a certification statement. In reality, each step requires care and can quickly feel overwhelming – especially if you’ve just uncovered years of missed filings.
This is where professional guidance makes all the difference. An experienced tax expert not only prepares accurate returns and ensures compliance with FBAR, FATCA, PFIC, and foreign entity rules, but also frames your situation clearly so the IRS understands it for what it is: non-willful oversight, not tax evasion.
Instead of worrying whether you’ve overlooked an account or misread a rule, you can move forward with confidence knowing your record is clean and your obligations are met. At Taxes for Expats, we’ve guided thousands of Americans abroad through this exact process. The result is peace of mind – and the freedom to focus on your life overseas without the shadow of IRS penalties hanging over you.
FAQ
No. If the IRS has already contacted you regarding tax delinquency, you are not eligible for SFCP.
The IRS typically processes streamlined submissions within several months to a year, depending on backlog and case complexity.
You must pay any owed taxes along with your streamlined submission. If you’re unable to pay in full, consider setting up an IRS installment agreement.
Yes, but only through the streamlined domestic offshore procedures (SDOP), which may involve penalties.
