Streamlined Foreign Offshore Procedures

For U.S. citizens residing in Taiwan who have not filed U.S. tax returns or reported foreign financial accounts (such as Taiwan bank deposits, insurance policies, etc.) for several years, but whose failure to do so was non-willful, the IRS offers the Streamlined Foreign Offshore Procedures (SFOP) — a program that allows individuals to return to U.S. tax compliance safely and legally. This article explains the application steps for this program.

Confirm eligibility

First, the applicant must determine whether they meet the eligibility requirements. If the applicant is a U.S. citizen or green card holder, the following conditions must be satisfied:

• The individual must have resided outside the United States for at least 330 full days during at least one of the past three tax years for which returns are being filed.

• The failure to file tax returns or report foreign accounts must have been non-willful, meaning due to misunderstanding, lack of awareness of the law, language barriers, or similar reasons—not intentional tax evasion.

• The applicant must not be under an active IRS audit or criminal investigation at the time of applying.

Prepare returns

Once eligibility is confirmed, the applicant must prepare and submit delinquent or amended federal income tax returns for the most recent three years that are past the original due date. If any of these returns were previously filed but contained omissions or errors, amended returns must be submitted for those years. Along with the returns, the applicant must also include all applicable international reporting forms, such as:

• Form 8938 (Statement of Specified Foreign Financial Assets),

• Form 5471 (for those with ownership in foreign corporations),

• Form 3520 (to report foreign trusts or gifts), etc.

In addition, the applicant must file six years of FBARs (Foreign Bank Account Reports), using FinCEN Form 114, which must be submitted electronically through the FinCEN online system.

Personal statement

Once all required tax forms are completed, the applicant must also fill out Form 14653 – the “Certification by U.S. Person Residing Outside of the United States for Streamlined Foreign Offshore Procedures.” And, applicant must include a statement with the declaration of explaining the applicant's background, overseas residency and employment history, and the reasons for the failure to comply with U.S. tax obligations. The narrative should demonstrate sincerity and emphasize that there was no intent to evade taxes.

Pay tax and interest

After compiling these documents, the applicant must calculate and pay any taxes owed, along with applicable interest. It's important to note that if the application is accepted and all requirements are met, the IRS will waive all penalties, including late-filing penalties, late-payment penalties, FATCA penalties, and FBAR penalties.

Mail paper tax return

Each tax return submitted must have “Streamlined Foreign Offshore” clearly written in red ink on the top of the first page so that the IRS can identify the submission as part of this program. Once all documents are organized, the entire application package must be mailed in paper form to the designated IRS address. The next step is simply to wait for the IRS to review and process the submission.

Plan ahead

Because the application requires financial information spanning three years of income and six years of foreign account records, substantial preparation may be necessary. For example, the applicant might need to request six years of bank transaction records from the banks, obtain cash value statements from insurance companies, or request Taiwan tax transcripts from the National Taxation Bureau of Taiwan. If the applicant also has income from other countries besides Taiwan, those foreign-source income documents must also be included in the filing.

Therefore, for anyone planning to use the Streamlined Foreign Offshore Procedures, it is highly recommended to begin preparing as early as possible to ensure sufficient time for gathering documents, completing forms, and reviewing the submission for accuracy.