How to Use the IRS Streamlined Filing Compliance Procedures

If you’re a U.S. citizen living abroad or have foreign assets, you might not realize that you’re still required to file U.S. tax returns. Many people miss this obligation simply because they didn’t know about it. The good news is that the IRS understands this happens, and they’ve created the Streamlined Filing Compliance Procedures to help people get back on track without major penalties.

This program is a simple way to fix past mistakes and make sure your taxes are up to date. Unlike older programs that were complex and came with hefty penalties, Streamlined Filing makes it easier for people who made an honest mistake. By using this program, you can correct past tax returns, report foreign accounts, and avoid unnecessary fines.

This guide breaks down everything you need to know about Streamlined Filing Compliance Procedures in a way that’s easy to follow.

Why do I need to file US Taxes from abroad?

The US uses a citizenship-based taxation model.

This means that US citizens and Green Card holders are required to file annual tax returns if their worldwide income exceeds the IRS-defined annual minimum threshold.

These amounts adjust each year with inflation and are aligned with your tax filing status.

Taxpayer Status	2023 Tax Year (the taxes you file in 2024)	2024 Tax Year (the taxes you file in 2025)
Single	$13,850	$14,600
Married, filing separately	$13,850	$14,600
Married, filing jointly	$27,700	$29,200
Head of household	$20,800	$21,900

You might think that you’re off the hook if your income is below these amounts. However, filing can sometimes be financially advantageous, especially if you anticipate a refund from the IRS.

For example, you might want to file if:

• You’ve had taxes withheld from your paycheck
• You’ve made estimated tax payments
• You’re eligible for refundable tax credits

What is the IRS Streamlined Filing Compliance Procedure?

The IRS Streamlined Filing Compliance Procedures help U.S. taxpayers fix past tax filing mistakes without heavy penalties. If you didn’t report foreign income or financial accounts because you weren’t aware of the rules, this program lets you correct those errors.

There are two versions of the program:

• Streamlined Foreign Offshore Procedures (SFOP) – For U.S. taxpayers who live outside the U.S.
• Streamlined Domestic Offshore Procedures (SDOP) – For U.S. taxpayers who live inside the U.S. but have unreported foreign accounts or income.

Criteria	Streamlined Domestic Offshore Procedures	Streamlined Foreign Offshore Procedures
US residency requirement	Resident	Non-resident
Nature of tax filing default	Non-willful	Non-willful
Returns to file	– Income tax: Most recent 3 years  – FBAR: Most recent 6 years	– Income tax: Most recent 3 years  – FBAR: Most recent 6 years
Penalties	5% of foreign account balance	None
Previous filing of returns	Must have previously filed income tax returns	No requirement
Type of tax return	Amended (1040X) only	1040 or 1040X
Number of default years	Must not have failed to file returns for each of the previous three years	N/A

Prior to this program, the only option available was the Offshore Voluntary Disclosure Program (OVDP), known for its lack of leniency. In 2010, the introduction of the Foreign Account Tax Compliance Act (FATCA) resulted in a spike in non-compliance cases, causing outrage in the global expat community.

In response to the need for a more user-friendly solution, the IRS introduced the Streamlined Filing Compliance Procedures in 2012.

Who can use Streamlined Filing?

You can qualify for Streamlined Filing if:

• You didn’t intentionally avoid taxes – Your mistake must be non-willful, meaning you didn’t knowingly try to cheat the system.
• You meet the residency requirements:
  • Streamlined Foreign Offshore Procedure: You’ve lived outside the U.S. for at least 330 days in one of the last three years.
  • Streamlined Domestic Offshore Procedure: You’ve lived in the U.S. for more than 35 days per year in one of the last three years.
• The IRS hasn’t already initiated a civil examination (i.e. an audit) of your returns
• You have a valid taxpayer ID, such as a social security number

What is non-willful conduct?

Non-willful conduct means that you did not intentionally break tax laws or try to hide income. It refers to mistakes made due to misunderstanding tax obligations, forgetting to file, or being unaware of reporting requirements. If you genuinely didn’t know you had to report foreign income or accounts and didn’t act in a deceptive way, the IRS considers this non-willful. This is an important distinction because the Streamlined Filing Compliance Procedures are designed specifically for people who made unintentional errors—not those who deliberately avoided paying taxes.

Step-by-Step: How to File a Streamlined Procedure

1. Gather Your Paperwork:

• Income & deduction information for the last three years
• Information for foreign entities and assets you have an interest in, such as foreign corporations, partnerships, trusts, investment companies (mutual funds), etc.
• Bank statements for your financial accounts abroad
• Dates of travel to and from the U.S. during the time period

2. Fill Out Your Tax Returns:

• Prepare tax returns for the past three years including your worldwide income. For most taxpayers this will be a Form 1040, but if filing under the domestic procedure you may file a Form 1040X
• Take advantage of any tax breaks offered to taxpayers living abroad such as the Foreign Earned Income Exclusion or Foreign Tax Credit.
• Write “Streamlined Foreign Offshore” or “Streamlined Domestic Offshore” on the top of your tax returns and informational returns you are filing

3. File Your FBARs:

• Submit up to six years of missing FBARs electronically through the BSA e-filing system.
• On the cover page of the electronic form, select “Other” as the reason for filing late and in the explanation box, enter “Streamlined Filing Compliance Procedures.” 

4. Submit Your Non-Willful Conduct Certification:

• You’ll use Form 14653 or Form 14654 to act as a cover letter for your Streamlined Procedure
• Include a statement explaining to the IRS:
  • Why you previously failed to file
  • How you found out about your requirement to file
  • If you were given any misleading or inaccurate information from a professional that led you to not file previously
• Use Form 14654 to calculate a penalty on unreported foreign account balances when filing the Streamlined Domestic Offshore Procedure

5. Pay Any Taxes and Interest Owed:

• You’ll need to pay any back taxes associated with the prepared tax returns, plus interest.
• The Streamlined Foreign Offshore Procedure is penalty free!
• If you’re filing under SDOP, you may owe a 5% penalty on your unreported foreign account balances.

6. Send Everything to the IRS:

• Mail your documents to the correct IRS processing center.

Streamlined Foreign Offshore Mailing Address:

Internal Revenue Service
3651 South I-H 35
Stop 6063 AUSC
Attn: Streamlined Foreign Offshore
Austin, TX 78741

Streamlined Foreign Offshore Mailing Address:

Internal Revenue Service
3651 South I-H 35Stop 6063 AUSC
Attn: Streamlined Domestic Offshore
Austin, TX 78741

Benefits of IRS Streamlined Procedures

Wondering what’s in it for you when you catch up on your taxes through the Streamlined Filing Compliance Procedures? Let’s talk benefits. Participating in the Streamlined Filing Compliance Procedures offers several advantages:

• Avoid Harsh Penalties: Unlike other IRS amnesty programs, SFOP filers face zero penalties, while SDOP filers only pay a reduced 5% penalty.
• Eliminate Audit Risks: Voluntary disclosure through this program significantly reduces the risk of IRS scrutiny.
• Catch Up on U.S. Tax Filings: Expats who have unreported income can file overdue tax returns without severe consequences.
• Maximize Tax Deductions and Credits: Filing under this program allows taxpayers to claim the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) retroactively.

Common Misconceptions About Streamlined Filing

In addition to

“This program is only for tax evaders.”

• Incorrect. The program is designed for honest taxpayers who unintentionally failed to report income or foreign accounts. Many expats, dual citizens, and those with international financial interests fall into this category because they were simply unaware of their obligations. The IRS created the Streamlined Procedures specifically to help these individuals, not to target those attempting tax fraud.

“If I file, I’ll automatically be audited.”

• No. The IRS introduced the Streamlined Program to encourage voluntary compliance, not to penalize honest mistakes. The majority of taxpayers who use this program successfully file without being audited. The key is ensuring all information provided is complete and accurate, reducing the likelihood of further IRS scrutiny.

“I live in the U.S., so I don’t qualify.”

• Not true. There are two versions of the program: Streamlined Foreign Offshore Procedures (SFOP) for those who live abroad and Streamlined Domestic Offshore Procedures (SDOP) for those residing in the U.S. If you have foreign accounts or unreported income, you may still qualify under SDOP—even if you’ve lived in the U.S. your entire life.

“The process is too complicated.”

• While filing taxes can be intimidating, the Streamlined Procedures are much simpler than other IRS amnesty programs. The IRS requires only three years of amended tax returns and six years of FBARs, along with a signed statement confirming your non-willful intent. Many taxpayers complete the process with the help of a tax professional to ensure accuracy.

“I’ll owe a huge tax bill if I file.”

• Not necessarily. Many taxpayers who qualify for the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC) find that they owe little to no back taxes. The Streamlined Procedures allow you to retroactively claim these tax benefits, which can significantly reduce or eliminate your tax liability. More than 80% of Bright!Tax clients historically have not owed the IRS when filing a Streamlined Procedure.

Additional Resources for Accidental Americans

If you’ve found yourself with US citizenship but have never lived or worked in the States, you might be scratching your head about your tax obligations. Don’t worry; the Streamlined Filing Compliance Procedures have you covered.

Accidental Americans often discover their US tax obligations late in the game, usually because they were born in the US to foreign parents or acquired citizenship through a US parent. If this sounds like you, here are some resources to help you navigate this unique situation.

Websites and online tools

• IRS Website: The IRS has a dedicated section for Accidental Americans, offering guidelines and FAQs to help you understand your tax obligations.
• Streamlined Filing Compliance Procedures Page: This is your go-to source for all things related to the Streamlined Procedures, including eligibility criteria and filing instructions.
• Taxpayer Advocate Service: This independent organization within the IRS can help you resolve issues and provide free tax advice.
• Bright!Tax Blog: Our blog offers a wealth of information tailored for Accidental Americans, from detailed guides to expert advice.

Professional help

• Certified Public Accountants (CPAs): A CPA specialized in expat taxes can guide you through the filing process and ensure you’re taking advantage of all available tax benefits.
• Tax Attorneys: If you’re facing more complex issues, a tax attorney can provide legal advice and representation.

Community support

• Expat Forums and Social Media Groups: These platforms offer a wealth of shared experiences and advice from fellow Accidental Americans.
• Accidental American Associations: Organizations like the Association of Accidental Americans provide advocacy and support.

Remember, being an Accidental American doesn’t mean you have to navigate the US tax system alone. These resources are here to help you every step of the way!

Final Thoughts

The IRS Streamlined Filing Compliance Procedures provide an essential pathway for U.S. expatriates and taxpayers with offshore accounts to correct past tax reporting mistakes without facing severe penalties. If you think you qualify, it’s best to act promptly and consider consulting a tax professional for assistance.

The Bright!Tax team has provided expert guidance to thousands of U.S. taxpayers using the Streamlined Filing Compliance Procedures over the past decade since it’s introduction. If you’re seeking a tax professional to guide you through the next steps, schedule a complimentary kick-off call with one of our CPAs today.